Grasping Reality with Both Hands: bradford-delong.com: tag:typepad.com,2003:weblog-1227122018-04-18T15:36:00-07:00If you would rather just see Highlighted Posts...TypePadtag:typepad.com,2003:post-6a00e551f08003883401b7c9594a39970b2018-04-18T15:36:00-07:002018-04-18T15:36:00-07:00**Should-Read**: **Kevin Kelly**: [The Myth of a Superhuman AI](https://www.wired.com/2017/04/the-myth-of-a-superhuman-ai/?mbid=social_twitter_onsiteshare): "'I’ve heard that in the future computerized AIs will become so much smarter than us that they will take all our jobs and resources, and humans will go extinct. Is this true?' That’s the most common question I get whenever I give a talk about AI... >...Buried in this scenario of a takeover of superhuman artificial intelligence are five assumptions which, when examined closely, are not based on any evidence. These claims might be true in the future, but there is no evidence to date to support them. The assumptions behind a superhuman intelligence arising soon are: >1. Artificial intelligence is already getting smarter than us, at an exponential rate. >2. We’ll make AIs into a general purpose intelligence, like our own. >3. We can make human intelligence in silicon. >4. Intelligence can be expanded without limit. >5. Once we have exploding superintelligence it can solve most of our problems. >In contradistinction to this orthodoxy, I find the following five heresies to have more evidence to support them. >1. Intelligence is not a single dimension, so “smarter than humans” is a meaningless concept. >2. Humans do not have general purpose minds,...J. Bradford DeLong

Should-Read: Kevin Kelly: The Myth of a Superhuman AI: "'I’ve heard that in the future computerized AIs will become so much smarter than us that they will take all our jobs and resources, and humans will go extinct. Is this true?' That’s the most common question I get whenever I give a talk about AI...

...Buried in this scenario of a takeover of superhuman artificial intelligence are five assumptions which, when examined closely, are not based on any evidence. These claims might be true in the future, but there is no evidence to date to support them. The assumptions behind a superhuman intelligence arising soon are:

Artificial intelligence is already getting smarter than us, at an exponential rate.

We’ll make AIs into a general purpose intelligence, like our own.

We can make human intelligence in silicon.

Intelligence can be expanded without limit.

Once we have exploding superintelligence it can solve most of our problems.

In contradistinction to this orthodoxy, I find the following five heresies to have more evidence to support them.

Intelligence is not a single dimension, so “smarter than humans” is a meaningless concept.

Humans do not have general purpose minds, and neither will AIs.

Emulation of human thinking in other media will be constrained by cost.

Dimensions of intelligence are not infinite.

Intelligences are only one factor in progress.

If the expectation of a superhuman AI takeover is built on five key assumptions that have no basis in evidence, then this idea is more akin to a religious belief—a myth. In the following paragraphs I expand my evidence for each of these five counter-assumptions, and make the case that, indeed, a superhuman AI is a kind of myth....

We run on ecosystems of thinking. We contain multiple species of cognition that do many types of thinking: deduction, induction, symbolic reasoning, emotional intelligence, spacial logic, short-term memory, and long-term memory. The entire nervous system in our gut is also a type of brain with its own mode of cognition. We don’t really think with just our brain; rather, we think with our whole bodies. These suites of cognition vary between individuals and between species. A squirrel can remember the exact location of several thousand acorns for years.... That superpower is bundled with some other modes that are dim compared to ours in order to produce a squirrel mind....

Likewise in AI. Artificial minds already exceed humans in certain dimensions. Your calculator is a genius in math; Google’s memory is already beyond our own in a certain dimension. We are engineering AIs to excel in specific modes. Some of these modes are things we can do, but they can do better, such as probability or math. Others are type of thinking we can’t do at all—memorize every single word on six billion web pages, a feat any search engine can do. In the future, we will invent whole new modes of cognition that don’t exist in us and don’t exist anywhere in biology.... In many cases they will be new, narrow, “small,” specific modes for specific jobs—perhaps a type of reasoning only useful in statistics and probability. In other cases the new mind will be complex types of cognition that we can use to solve problems our intelligence alone cannot.... At the same time we will integrate these various modes of cognition into more complicated, complex societies of mind....

Thinking differently from humans is AI’s chief asset. This is yet another reason why calling it “smarter than humans” is misleading and misguided....

I understand the beautiful attraction of a superhuman AI god. It’s like a new Superman. But like Superman, it is a mythical figure. Somewhere in the universe a Superman might exist, but he is very unlikely. However myths can be useful, and once invented they won’t go away. The idea of a Superman will never die. The idea of a superhuman AI Singularity, now that it has been birthed, will never go away either. But we should recognize that it is a religious idea at this moment and not a scientific one. If we inspect the evidence we have so far about intelligence, artificial and natural, we can only conclude that our speculations about a mythical superhuman AI god are just that: myths....

Yet non-superhuman artificial intelligence is already here, for real.... In the wider sense of... a continuous spectrum of various smartness, intelligences, cognition, reasonings, learning... AI is already pervasive on this planet and will continue to spread, deepen, diversify, and amplify. No invention before will match its power to change our world, and by century’s end AI will touch and remake everything in our lives. Still the myth of a superhuman AI, poised to either gift us super-abundance or smite us into super-slavery (or both), will probably remain alive—a possibility too mythical to dismiss...

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e3dc25970c2018-03-19T20:11:38-07:002018-03-19T20:11:38-07:00**Should-Read**: **Paul Krugman**: [Trump and Trade and Zombies](https://www.nytimes.com/2018/03/19/opinion/donald-trump-trade-.html): "Until now, the most visible neo-goldbug in the administration has been David Malpass... the former chief economist of Bear Stearns... >...a man with a Kudlow-like record of being wrong about everything. In particular, however, back in 2011 Malpass published an op-ed article declaring that what America needed to fix its economic ills was a stronger dollar (and higher interest rates). It was a bizarre claim. After all, at the time the unemployment rate was still 9 percent—and a stronger dollar would have made things even worse. Why? Because it would have made U.S. products less competitive, increasing the trade deficit—and a situation of persistently high unemployment is the one situation in which trade deficits really are an unambiguously bad thing, reducing the demand for domestic goods and services. But here’s the thing: Kudlow appears to share Malpass’s worldview. In fact, his first newsworthy statement after Trump announced his selection was a call for a higher dollar—something that would worsen the very trade deficit Trump sees as a sign of American weakness. >Why has Trump hired people with such conflicting notions about international economic policy? The answer, presumably, is that he doesn’t understand...J. Bradford DeLong

Should-Read: Paul Krugman: Trump and Trade and Zombies: "Until now, the most visible neo-goldbug in the administration has been David Malpass... the former chief economist of Bear Stearns...

...a man with a Kudlow-like record of being wrong about everything. In particular, however, back in 2011 Malpass published an op-ed article declaring that what America needed to fix its economic ills was a stronger dollar (and higher interest rates). It was a bizarre claim. After all, at the time the unemployment rate was still 9 percent—and a stronger dollar would have made things even worse. Why? Because it would have made U.S. products less competitive, increasing the trade deficit—and a situation of persistently high unemployment is the one situation in which trade deficits really are an unambiguously bad thing, reducing the demand for domestic goods and services. But here’s the thing: Kudlow appears to share Malpass’s worldview. In fact, his first newsworthy statement after Trump announced his selection was a call for a higher dollar—something that would worsen the very trade deficit Trump sees as a sign of American weakness.

Why has Trump hired people with such conflicting notions about international economic policy? The answer, presumably, is that he doesn’t understand the issues well enough to realize that the conflict exists. And what both sides in this dispute share is a general propensity for invincible ignorance, which makes them Trump’s kind of people. Anyway, on international economics the Trump administration is now on track for a battle of the zombies—a fight between two sets of bad ideas that refuse to die. Pass the popcorn...

tag:typepad.com,2003:post-6a00e551f08003883401b7c957b511970b2018-03-19T14:10:17-07:002018-03-19T14:10:17-07:00**Should-Read**: **Noah Smith**: [How Universities Make Cities Great](https://www.bloomberg.com/view/articles/2018-03-06/how-universities-make-cities-great): "Abel and Deitz find that university research expenditures have a strong effect on the number of educated people in a region—over four times as strong as the effect of degree production... >...Skilled workers come to do research at the university itself. But most of the effect comes from private-sector activity in the surrounding economy. When a university spends a lot on research, ideas and technology leak out to surrounding businesses in myriad ways. Universities cross-license technologies to the private sector. Academics consult for local businesses. Grad students, researchers, and professors start local businesses of their own. Companies establish research centers and hire smart people away from their Ph.D. programs or campus jobs. Some universities provide forums for local entrepreneurs, inventors and academics to meet each other, exchange ideas and offer employment. >High-productivity technology businesses therefore tend to cluster around universities, in order to take advantage of the rich flow of ideas and skilled workers. That, in turn, draws smart educated people from other regions, boosting productivity and raising wages even for less-educated locals. >The policy implication is clear. In order to boost local economies, universities should stop seeing themselves only as educators,...J. Bradford DeLong

Should-Read: Noah Smith: How Universities Make Cities Great: "Abel and Deitz find that university research expenditures have a strong effect on the number of educated people in a region—over four times as strong as the effect of degree production...

...Skilled workers come to do research at the university itself. But most of the effect comes from private-sector activity in the surrounding economy. When a university spends a lot on research, ideas and technology leak out to surrounding businesses in myriad ways. Universities cross-license technologies to the private sector. Academics consult for local businesses. Grad students, researchers, and professors start local businesses of their own. Companies establish research centers and hire smart people away from their Ph.D. programs or campus jobs. Some universities provide forums for local entrepreneurs, inventors and academics to meet each other, exchange ideas and offer employment.

High-productivity technology businesses therefore tend to cluster around universities, in order to take advantage of the rich flow of ideas and skilled workers. That, in turn, draws smart educated people from other regions, boosting productivity and raising wages even for less-educated locals.

The policy implication is clear. In order to boost local economies, universities should stop seeing themselves only as educators, and start seeing themselves as platforms for local economic activity. Cleveland State University researchers Richey Piiparinen, Jim Russell, and Charlie Post call the former a “consumer university” model, and the latter a “producer university” model. They apply the distinction to explain the diverging performances of Cleveland and Pittsburgh. Cleveland’s colleges, they say, are still too focused on educating locals, while Pittsburgh’s—especially Carnegie Mellon—have taken an active role in boosting the city’s technology industry...

tag:typepad.com,2003:post-6a00e551f08003883401b7c94ed889970b2018-03-19T06:17:48-07:002018-03-18T15:41:23-07:00**Should-Read**: A very nice paper indeed: **J. Vernon Henderson, Adam Storeygard, Tim L. Squires, and David N. Weil**: [The Global Spatial Distribution of Economic Activity: Nature, History, and the Role of Trade](http://www.nber.org/papers/w22145): "We study the distribution of economic activity, as proxied by lights at night, across 250,000 grid cells of average area 560 square kilometers... >...Nearly half of the variation can be explained by a parsimonious set of physical geography attributes.... Geographic characteristics... two groups... agriculture... trade.... Agriculture variables have relatively more explanatory power in countries that developed early and the trade variables have relatively more in countries that developed late.... Two technological shocks occur, one increasing agricultural productivity and the other decreasing transportation costs.... Agglomeration economies lead to persistence in urban locations. In countries that developed early, structural transformation due to rising agricultural productivity began at a time when transport costs were still relatively high.... When transport costs fell, these local agglomerations persisted. In late developing countries, transport costs fell well before structural transformation... [so] manufacturing agglomerated in relatively few, often coastal, locations.... >The base covariates are... malaria and ruggedness.... Our agricultural covariates... temperature, precipitation, length of growing period, land suitability for agriculture, elevation, and latitude... 14 biome indicators.......J. Bradford DeLong

...Nearly half of the variation can be explained by a parsimonious set of physical geography attributes.... Geographic characteristics... two groups... agriculture... trade.... Agriculture variables have relatively more explanatory power in countries that developed early and the trade variables have relatively more in countries that developed late.... Two technological shocks occur, one increasing agricultural productivity and the other decreasing transportation costs.... Agglomeration economies lead to persistence in urban locations. In countries that developed early, structural transformation due to rising agricultural productivity began at a time when transport costs were still relatively high.... When transport costs fell, these local agglomerations persisted. In late developing countries, transport costs fell well before structural transformation... [so] manufacturing agglomerated in relatively few, often coastal, locations....

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e3adee970c2018-03-19T06:17:10-07:002018-03-19T06:17:10-07:00**Should-Read**: This makes no sense at all. There is nothing in the formal or informal record suggesting that any of the potential deciders and influencers inside the Trump Administration support the steel and aluminum tariffs as some kind of Xanatos Gambit to persuade China to adopt intellectual property rules more to the liking of U.S. firms doing business in China. Absolutely nothing: **Martin Feldstein**: [The Real Reason for Trump’s Steel and Aluminum Tariffs](https://www.project-syndicate.org/commentary/trump-steel-tariffs-targeting-china-by-martin-feldstein-2018-03): "The US tariffs will... increase the likelihood that China will accelerate the reduction in subsidized excess capacity... >...It will be possible to exempt imports from military allies in NATO, as well as Japan and South Korea, focusing the tariffs on China.... The administration has not yet said that it will focus the tariffs in this way.... >For the US, the most important trade issue with China concerns technology transfers, not Chinese exports... The Chinese government was using the Peoples Liberation Army’s (PLA) sophisticated cyber skills to infiltrate American companies and steal technology.... President Barack Obama and President Xi Jinping met in California in June 2013.... Xi then agreed that the Chinese government would no longer use the PLA or other government agencies to steal US technology.... It...J. Bradford DeLong

Should-Read: This makes no sense at all. There is nothing in the formal or informal record suggesting that any of the potential deciders and influencers inside the Trump Administration support the steel and aluminum tariffs as some kind of Xanatos Gambit to persuade China to adopt intellectual property rules more to the liking of U.S. firms doing business in China. Absolutely nothing: Martin Feldstein: The Real Reason for Trump’s Steel and Aluminum Tariffs: "The US tariffs will... increase the likelihood that China will accelerate the reduction in subsidized excess capacity...

...It will be possible to exempt imports from military allies in NATO, as well as Japan and South Korea, focusing the tariffs on China.... The administration has not yet said that it will focus the tariffs in this way....

For the US, the most important trade issue with China concerns technology transfers, not Chinese exports... The Chinese government was using the Peoples Liberation Army’s (PLA) sophisticated cyber skills to infiltrate American companies and steal technology.... President Barack Obama and President Xi Jinping met in California in June 2013.... Xi then agreed that the Chinese government would no longer use the PLA or other government agencies to steal US technology.... It appears that such cyber theft has been reduced dramatically....

Current technology theft takes a different form. American firms that want to do business in China are often required to transfer their technology to Chinese firms as a condition of market entry. These firms “voluntarily” transfer production knowhow because they want access to a market.... The US cannot use traditional remedies for trade disputes or World Trade Organization procedures to stop China’s behavior.... US negotiators will use the threat of imposing the tariffs on Chinese producers as a way to persuade China’s government to abandon the policy of “voluntary” technology transfers.... [Then] the threat of tariffs will have been a very successful tool of trade policy.

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e3ad47970c2018-03-19T06:09:35-07:002018-03-19T06:09:35-07:00**Should-Read**: **Dan Shaviro**: [Another new publication!](https://danshaviro.blogspot.com/2018/03/another-new-publication.html): "'Evaluating the New U.S. Pass-Through Rules'... >...The pass-through rules that the U.S. Congress enacted in 2017-permitting the owners of unincorporated businesses in favored industries to escape tax on 20 per cent of their income-achieved a rare and unenviable trifecta, by making the tax system less efficient, less fair, and more complicated. It lacked any coherent (or even clearly articulated) underlying principle, was shoddily executed, and ought to be promptly repealed. Given the broader surrounding circumstances, the mere fact of its enactment sends out a disturbing message about disregard among high-ranking US policymakers for basic principles of competence, transparency, and fair governance.... >This article is a bit on the candid and unvarnished side-even though it's been toned down significantly from earlier drafts. But I think the tone is justified given the passthrough rules' egregiousness-at least leaving aside the old maxim that, if you can't say something nice, you shouldn't say anything at all. (That maxim would tend to hold down the quantity of writing about the passthrough rules.) It also addresses the 2017 act's negligence or worse (it appears to have been deliberate) in cutting the corporate rate without addressing the use of C corporations...J. Bradford DeLong

...The pass-through rules that the U.S. Congress enacted in 2017-permitting the owners of unincorporated businesses in favored industries to escape tax on 20 per cent of their income-achieved a rare and unenviable trifecta, by making the tax system less efficient, less fair, and more complicated. It lacked any coherent (or even clearly articulated) underlying principle, was shoddily executed, and ought to be promptly repealed. Given the broader surrounding circumstances, the mere fact of its enactment sends out a disturbing message about disregard among high-ranking US policymakers for basic principles of competence, transparency, and fair governance....

This article is a bit on the candid and unvarnished side-even though it's been toned down significantly from earlier drafts. But I think the tone is justified given the passthrough rules' egregiousness-at least leaving aside the old maxim that, if you can't say something nice, you shouldn't say anything at all. (That maxim would tend to hold down the quantity of writing about the passthrough rules.) It also addresses the 2017 act's negligence or worse (it appears to have been deliberate) in cutting the corporate rate without addressing the use of C corporations as tax shelters that can be used to lower the rate on labor income. Read the article and you'll find a few well-chosen (I'd like to think) words about that...

tag:typepad.com,2003:post-6a00e551f08003883401bb09f32693970d2018-03-19T06:02:23-07:002018-03-18T16:55:41-07:00**Should-Read**: A rather odd piece in its rhetorical pose. It really is not a critique of Allen's hypothesis about the especially strong incentives in Industrial Revolution England to invent and innovate in coal energy and machine intensive ways: it is a reinforcement of it: an argument that British patriarchy reinforced and augmented the imperial, coal-resource, cultural, scientific, and technological forces converging to make the British Industrial Revolution: **Jane Humphries** (2013): [The lure of aggregates and the pitfalls of the patriarchal perspective: a critique of the high wage economy interpretation of the British industrial revolution](https://www.economics.ox.ac.uk/materials/papers/5138/humphries91.pdf): "The lure of aggregates and the pitfalls of the patriarchal perspective... >...a critique of the high wage economy interpretation of the British industrial revolution... >...The account of the high wage economy is misleading because it focuses on men and male wages, underestimates the relative caloric needs of women and children, and bases its view of living standards on an ahistorical and false household economy. A more accurate picture of the structure and functioning of working-class households provides an alternative explanation of inventive and innovative activity in terms of the availability of cheap and amenable female and child labour and thereby offers a broader interpretation of the...J. Bradford DeLong

...a critique of the high wage economy interpretation of the British industrial revolution...

...The account of the high wage economy is misleading because it focuses on men and male wages, underestimates the relative caloric needs of women and children, and bases its view of living standards on an ahistorical and false household economy. A more accurate picture of the structure and functioning of working-class households provides an alternative explanation of inventive and innovative activity in terms of the availability of cheap and amenable female and child labour and thereby offers a broader interpretation of the industrial revolution...

tag:typepad.com,2003:post-6a00e551f08003883401b7c959032d970b2018-03-18T16:51:13-07:002018-03-18T16:51:13-07:00**Should-Read**: **Matt Townsend et al.**: [America’s ‘Retail Apocalypse’ Is Really Just Beginning](https://www.bloomberg.com/graphics/2017-retail-debt/): "The reason isn’t as simple as Amazon.com Inc. taking market share... >...or twenty-somethings spending more on experiences than things. The root cause is that many of these long-standing chains are overloaded with debt—often from leveraged buyouts led by private equity firms. There are billions in borrowings on the balance sheets of troubled retailers, and sustaining that load is only going to become harder—even for healthy chains. The debt coming due, along with America’s over-stored suburbs and the continued gains of online shopping, has all the makings of a disaster. The spillover will likely flow far and wide across the U.S. economy. There will be displaced low-income workers, shrinking local tax bases and investor losses on stocks, bonds and real estate. If today is considered a retail apocalypse, then what’s coming next could truly be scary. Until this year, struggling retailers have largely been able to avoid bankruptcy by refinancing to buy more time. But the market has shifted, with the negative view on retail pushing investors to reconsider lending to them. Toys “R” Us Inc. served as an early sign of what might lie ahead...J. Bradford DeLong

...or twenty-somethings spending more on experiences than things. The root cause is that many of these long-standing chains are overloaded with debt—often from leveraged buyouts led by private equity firms. There are billions in borrowings on the balance sheets of troubled retailers, and sustaining that load is only going to become harder—even for healthy chains. The debt coming due, along with America’s over-stored suburbs and the continued gains of online shopping, has all the makings of a disaster. The spillover will likely flow far and wide across the U.S. economy. There will be displaced low-income workers, shrinking local tax bases and investor losses on stocks, bonds and real estate. If today is considered a retail apocalypse, then what’s coming next could truly be scary. Until this year, struggling retailers have largely been able to avoid bankruptcy by refinancing to buy more time. But the market has shifted, with the negative view on retail pushing investors to reconsider lending to them. Toys “R” Us Inc. served as an early sign of what might lie ahead...

tag:typepad.com,2003:post-6a00e551f08003883401bb09fc34e9970d2018-03-18T16:44:31-07:002018-03-18T16:46:45-07:00**Should-Read**: Hospital services are somewhat misleading, because they buy us a lot more today than they bought us back in the 1990s. College tuition as well: it is a decline in financial aid as a proportion to cost that has driven the cost up so much. College textbooks is a monopoly intellectual property story. It is an extraordinary-shift-in-relative-prices story. But a large part of that story is a political story: **Barry Ritholtz**: [Inflation: Price Changes 1997 to 2017](http://ritholtz.com/2018/02/price-changes-1997-2017/): "It is notable that the two big outliers to the upside are health care (hospital, medical care, prescription drugs) and college (tuition, textbooks, etc.)... >...Clothes, cars, TVs, cell phones, software—technology in general—showed disinflation or outright deflation in prices. (Housing and food & beverage have been right at the middle of inflation levels). Wages have barely ticked over the median inflation measure, but that did not stop some people from blaming the correction on rising wages. Reading the pundits, I cannot tell which fate awaits us: the robot-driven apocalypse where we are all out of work, or the inevitable spike in wages that sends rates much higher and kills the market. Perhaps both — higher wages sends employers into the waiting arms of...J. Bradford DeLong

Should-Read: Hospital services are somewhat misleading, because they buy us a lot more today than they bought us back in the 1990s. College tuition as well: it is a decline in financial aid as a proportion to cost that has driven the cost up so much. College textbooks is a monopoly intellectual property story. It is an extraordinary-shift-in-relative-prices story. But a large part of that story is a political story: Barry Ritholtz: Inflation: Price Changes 1997 to 2017: "It is notable that the two big outliers to the upside are health care (hospital, medical care, prescription drugs) and college (tuition, textbooks, etc.)...

...Clothes, cars, TVs, cell phones, software—technology in general—showed disinflation or outright deflation in prices. (Housing and food & beverage have been right at the middle of inflation levels). Wages have barely ticked over the median inflation measure, but that did not stop some people from blaming the correction on rising wages. Reading the pundits, I cannot tell which fate awaits us: the robot-driven apocalypse where we are all out of work, or the inevitable spike in wages that sends rates much higher and kills the market. Perhaps both — higher wages sends employers into the waiting arms of our automated future. Regardless, I expect wages are ticking higher, but not appreciably so that the Fed must do anything drastic. And the increased comp should accrue to sectors like retail, housing, durable goods, travel, automobiles, etc. We are a long ways from the sort of wage push inflation of the 1990s..

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e38ab6970c2018-03-18T16:38:08-07:002018-03-18T16:38:40-07:00**Should-Read**: Charles Plosser and Richard Fisher are really bad economists, and were really bad central bankers: **Charles Plosser** (2008): [Meeting of the Federal Open Market Committee on March 18, 2008](https://www.federalreserve.gov/monetarypolicy/files/FOMC20080318meeting.pdf): "We have talked a lot about taking out insurance around this table... >...I believe the time has come to buy some insurance against our waning credibility about restraining inflation. That does not mean that we couldn’t choose to continue to make rate cuts at some future date, should that be called for. Ultimately, if we wish inflation expectations to be well anchored, we must act in a way that is consistent with such an outcome. Words are simply not enough. Reputational capital, whether it be for a central bank, an academic institution, or the brand capital of a firm, is very hard to build. But most of us know, in the private sector and in other sectors, that capital can be easily squandered. We must not let that happen... ---- **Richard Fisher** (2008): [Meeting of the Federal Open Market Committee on March 18, 2008](https://www.federalreserve.gov/monetarypolicy/files/FOMC20080318meeting.pdf): "I think it is pretty clear that I am not going to vote for further cuts... >...Look, Tim, we cut rates 50 basis points last time....J. Bradford DeLong

...I believe the time has come to buy some insurance against our waning credibility about restraining inflation. That does not mean that we couldn’t choose to continue to make rate cuts at some future date, should that be called for. Ultimately, if we wish inflation expectations to be well anchored, we must act in a way that is consistent with such an outcome. Words are simply not enough. Reputational capital, whether it be for a central bank, an academic institution, or the brand capital of a firm, is very hard to build. But most of us know, in the private sector and in other sectors, that capital can be easily squandered. We must not let that happen...

...Look, Tim, we cut rates 50 basis points last time. I was in a minority of one, and I respect the group around this table more than I respect myself. Here is the point: Everything that we wanted to go down went up, and everything that we wanted to go up went down. So I just wonder about the efficacy of the cuts as opposed to the measures that we have undertaken...

Weekend Reading: Kevin Rudd: Xi Jinping's Chinatag:typepad.com,2003:post-6a00e551f08003883401b8d2e38931970c2018-03-18T16:00:48-07:002018-03-18T16:00:48-07:00**Weekend Reading**: **Kevin Rudd**: Xi Jinping's China: "Next week marks the 216th anniversary of the founding of the West Point Military Academy... >...Its founding came less than 20 years after the defeat of the British at Yorktown in 1781. It followed the decision by President Thomas Jefferson to establish the United States Military Academy just after his inauguration in 1801. Indeed the United States continental army first occupied this place on 27 January 1778, barely two years into the Revolutionary War, when things were not proceeding all that well against the British in that great conflagration. So you have been here at West Point since virtually the first birth-pangs of this great Republic. >Over the span of history, this nation has grown from thirteen fissiparous colonies to become the most powerful nation on earth. And while the challenges have been many, you have preserved the flame of liberal democracy throughout the nation’s rise. >When this nation was being born, China was at its height. In 1799, the Qianlong Emperor died, having reigned for over 60 years. His grandfather, the Kangxi Emperor, had reigned for 61 years until 1722. Between both their reigns, the territorial expanse of the Chinese Empire virtually...J. Bradford DeLong
<div xmlns="http://www.w3.org/1999/xhtml"><p><img style="display:block; margin-left:auto; margin-right:auto;" src="http://delong.typepad.com/.a/6a00e551f08003883401bb09fc7e61970d-pi" alt="Xi Jinping" title="Xi_Jinping.png" border="0" width="747" height="304" /></p>
<p><strong>Weekend Reading</strong>: <strong>Kevin Rudd</strong>: <span style="text-transform: uppercase;">Xi Jinping's China</span>: "Next week marks the 216th anniversary of the founding of the West Point Military Academy...</p>
<blockquote>
<p>...Its founding came less than 20 years after the defeat of the British at Yorktown in 1781. It followed the decision by President Thomas Jefferson to establish the United States Military Academy just after his inauguration in 1801. Indeed the United States continental army first occupied this place on 27 January 1778, barely two years into the Revolutionary War, when things were not proceeding all that well against the British in that great conflagration. So you have been here at West Point since virtually the first birth-pangs of this great Republic. </p>
<p>Over the span of history, this nation has grown from thirteen fissiparous colonies to become the most powerful nation on earth. And while the challenges have been many, you have preserved the flame of liberal democracy throughout the nation’s rise. </p>
<p>When this nation was being born, China was at its height. In 1799, the Qianlong Emperor died, having reigned for over 60 years. His grandfather, the Kangxi Emperor, had reigned for 61 years until 1722. Between both their reigns, the territorial expanse of the Chinese Empire virtually doubled, occupying some 10 per cent of the world’s land area, 30 percent of the world’s population, and 32 percent of the world’s economy. </p>
<p>Although the United States sought to establish consular relations with China in 1784, this was rebuffed by Qianlong’s court, delaying the establishment of diplomatic relations until 1844 with the Treat of Wangxia. By this stage, China had already suffered its first major defeat at the hands of the British during the First Opium War. The second defeat would follow less than 20 years later at the hands of the British and the French. And so began China’s “Century of National Humiliation” until the birth of the People’s Republic in 1949. </p>
<p>As for Australia, proudly an ally of the United States since we first fought together in the trenches in 1918, our short history, at least as a settler society, has been considerably more recent than either China or the US—although our indigenous peoples, Aboriginal Australians, are the oldest continuing cultures on earth, going back 60,000 years. Because Washington’s continental army prevailed at Yorktown in 1781, not only did Britain lose these colonies, it also lost its convict dumping ground at Savannah Georgia. Back in the British Admiralty, after the Treaty of Paris in 1783, they dusted off the navigation charts of James Cook taken some 13 years before, and in 1788 established a convict colony and the first European settlement in what we now call Sydney, Australia. </p>
<p>China, because of its proximity and size, has loomed large in the Australian national imagination ever since. Just as it now looms large in the global imagination. Not least because China’s new leadership, under Xi Jinping, as of the very day he first came to power as General Secretary of the Chinese Communist Party five years ago, claimed that China’s national mission was now one of “national renaissance” (guojia fuxing). </p>
<p>Xi Jinping, in rallying his party to a future vision for his country, looks deeply to China’s history as a source of national inspiration. China’s national pride at the historical achievements of the great dynasties of the Qing, Ming, Song, Tang, and the Han is palpable. The Chinese political leadership harness their national past selectively, always carefully using rose-coloured glasses, omitting those chapters which may be more problematic for China’s current national narrative. But then again, China’s leaders are no more guilty of this than other countries. </p>
<p>Nonetheless, for those who are professionally charged with interpreting China’s future, as you are in this great military academy, it means that we must also take time to understand China’s past. To understand how China perceives the world around it. And to understand how it now perceives its own national destiny in the turbulent world of the 21st century. </p>
<p>It is one of the reasons why after more than 40 years of studying Chinese language, history, politics, economics, and culture, I have embarked on a fresh research project at Oxford University, seeking to define Xi Jinping’s worldview. This is not a static process. This is a dynamic process. China is as much deeply marked by its past, as it is being reshaped by the unprecedented torrent of economic, social, cultural, and technological forces that are washing over its future. </p>
<p>Over the last 40 years I have engaged China as a student, bureaucrat, diplomat, member of parliament, foreign minister, and prime minister. And now as the President of an American think tank, part of a venerable institution, the Asia Society, which has been engaging China since the earliest days of the People’s Republic in 1956. Understanding China is a lifelong journey. </p>
<p>For those of you who would become the next generation of American military leaders, it must be your lifelong journey as well. I argue that there will be no more important part of your professional skill-craft than to understand how Chinese leaders think, how they perceive the world, and how the world should most productively engage them. That applies also to your country’s future political leadership, corporate leadership, and every branch of its military. So I encourage you in your mission.</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>DEFINING XI JINPING’S CHINA</strong></p>
<p><strong>Xi’s Political Authority</strong>: The beginning of wisdom in understanding China’s view of the world is to understand China’s view of the future of its own country—its politics, its economics, its society. Xi Jinping lies at the apex of the Chinese political system. But his influence now permeates every level. </p>
<p>Five years ago, I wrote that Xi would be China’s most powerful leader since Deng. I was wrong. He’s now China’s most powerful leader since Mao. We see this at multiple levels. The anti-corruption campaign he’s wielded across the Party has not only helped him “clean up” the country’s almost industrial levels of corruption. It has also afforded the additional benefit of “cleaning up” all of Xi Jinping’s political opponents on the way through. It’s a formidable list: </p>
<ul>
<li>Bo Xilai, Politburo member and Party Secretary of Chongqing; </li>
<li>Zhou Yongkang, Politburo Standing Committee member and head of the internal security apparatus; </li>
<li>Xu Caihou, Vice Chairman of the Central Military Commission; </li>
<li>Guo Boxiong, Vice Chairman of the Central Military Commission; </li>
<li>Ling Jihua, former Chief of the General Office of the CPC and Chief of Staff to Hu Jintao; </li>
<li>Sun Zhengcai, Politburo member and another Party Secretary from Chongqing; </li>
</ul>
<p>And just prior to the 19th Party Congress, General Fang Fenghui, Chief of the Joint Staffs, and General Zhang Yang, Director of the PLA Political Work Department, who recently committed suicide.</p>
<p>None of this is for the faint-hearted. It says much about the inherent nature of a Chinese political system which has rarely managed leadership transitions smoothly. But it also points to the political skill-craft of Xi Jinping himself.</p>
<p>Xi Jinping is no political neophyte. He has grown up in Chinese party politics as conducted at the highest levels. Through his father, Xi Zhongxun, he has been on both the winning side and the losing side of the many bloody battles that have been fought within the Chinese Communist Party since the days of the Cultural Revolution half a century ago.</p>
<p>There is little that Xi Jinping hasn’t seen with his own eyes on the deepest internal workings of the Party. He has been through a “masterclass” of not only how to survive it, but also on how to prevail within it. For these reasons, he has proven himself to be the most formidable politician of his age. He has succeeded in pre-empting, outflanking, outmanoeuvring, and then removing each of his political adversaries. The polite term for this is power consolidation. In that, he has certainly succeeded.</p>
<p>The external manifestations of this are seen in the decision, now endorsed by the 19th Party Congress and the 13th National People’s Congress, to formally enshrine “Xi Jinping Thought” as part of the Chinese constitution. For Xi Jinping’s predecessors, Deng, Jiang and Hu, this privilege was only accorded them after they had formally left the political stage. In Xi Jinping’s case, it occurs near the beginning of what is likely to be a long political career.</p>
<p>A further manifestation of Xi Jinping’s extraordinary political power has been the concentration of the policy machinery of the Chinese Communist Party. Xi now chairs six top-level “leading small groups” as well as a number of central committees and commissions covering every major area of policy. </p>
<p>A third expression of Xi’s power has been the selection of candidates for the seven-man Standing Committee of the Politburo, the 20-person wider Politburo, and the 209-member Central Committee. There’s been some debate among China analysts as to the degree to which these ranks are now filled with Xi loyalists. My argument is simple: it is a much more accommodating and comfortable set of appointments from Xi Jinping’s personal perspective than what he inherited from the 18th Party Congress. </p>
<p>Furthermore, his ability to prevail on critical personnel selection is underlined by the impending appointment of his close friend and colleague Wang Qishan as Chinese Vice President. Wang Qishan himself has passed the retirement age, but this has proven to be no obstacle to retaining him as an ex-officio member of the politburo standing committee, as reflected in the footage carried yesterday by the Chinese media of the opening sessions of the National People’s Congress. And it is Wang Qishan who will be entrusted by Xi with working-level responsibility for the vast complexity that is now the US-China relationship.</p>
<p>A fifth manifestation of Xi Jinping’s accumulation of unchallenged personal power has been the decision to remove the provision of the 1982 Chinese State Constitution, which imposed a limit of two five-year terms on those appointed to the Chinese presidency. Xi Jinping is now 64 years old. He will be 69 by the expiration of his second term as President, General Secretary of the Party, and Chairman of the Central Military Commission. Given his own family’s longevity (his father lived to 88, and his mother is still alive at 91), as well as the general longevity of China’s most senior political leaders, it is prudent for us to assume that Xi Jinping, in one form or another, will remain China’s paramount leader through the 2020’s and into the following decade. </p>
<p>He therefore begins to loom large as a dominant figure not just in Chinese history, but in world history, in the twenty-first century. It will be on his watch that China finally becomes the largest economy in the world, or is at least returned to that status, which it last held during the Qing dynasty.</p>
<p>Finally, there is the personality of Xi Jinping himself as a source of political authority. For those who have met him and had conversations with him, he has a strong intellect, a deep sense of his country’s and the world’s history, and a deeply defined worldview of where he wants to lead his country. Xi Jinping is no accidental president. It’s as if he has been planning for this all his life.</p>
<p>It has been a lifetime’s accumulation of the intellectual software, combined with the political hardware of raw politics, which form the essential qualities of high political leadership in countries such as China. For the rest of the world, Xi Jinping represents a formidable partner, competitor or adversary, depending on the paths that are chosen in the future. </p>
<p>There are those within the Chinese political system who have opposed this large-scale accumulation of personal power in the hands of Xi Jinping alone, mindful of the lessons from Mao. In particular, the decision to alter the term-limits concerning the Chinese presidency has been of great symbolic significance within the Chinese domestic debate. State censorship was immediately applied to any discussion of the subject across China’s often unruly social media. The People’s Daily, in a surprisingly defensive editorial last week, was at pains to point out that the changes to term limits for the Chinese presidency simply brought China’s state constitution into line with the Party constitution, which imposed no term limits on the positions of General Secretary and Chairman of the Central Military Commission. Even more defensively, the People’s Daily was at equal pains to point out that these constitutional changes did not signify “leadership for life”.</p>
<p>For Xi’s continuing opponents within the system, what we might describe as “a silent minority”, this has created a central, symbolic target for any resentments they may hold against Xi Jinping’s leadership. It would be deeply analytically flawed to conclude that these individuals have any real prospect of pushing back against the Xi Jinping political juggernaut in the foreseeable future. But what these constitutional changes have done is to make Xi potentially vulnerable to any single, large-scale adverse event in the future. If you have become, in effect, “Chairman of Everything”, then it is easy for your political opponents to hold you responsible for anything and everything that could go wrong, whether you happen to be responsible for it or not. </p>
<p>This could include any profound miscalculation, or unintended consequence, arising from contingencies on the Korean Peninsula, Taiwan, the South China Sea, the Chinese debt crisis, or large-scale social disruption arising from unmanageable air pollution or a collapse in employment through a loss of competitiveness, large-scale automation or artificial intelligence.</p>
<p>However, militating against any of the above, and the “tipping points” which each could represent, is Xi Jinping’s seemingly absolute command of the security and intelligence apparatus of the Chinese Communist Party and the state. Xi Jinping loyalists have been placed in command of all sensitive positions across the security establishment. The People’s Armed Police have now been placed firmly under party control rather than under the control of the state. And then there is the new technological sophistication of the domestic security apparatus right across the country—an apparatus which now employs more people than the PLA.</p>
<p>We should never forget that the Chinese Communist Party is a revolutionary party which makes no bones about the fact that it obtained power through the barrel of a gun, and will sustain power through the barrel of a gun if necessary. We should not have any dewy-eyed sentimentality about any of this. It’s a simple fact that this is what the Chinese system is like.</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>Xi Jinping’s View of the Party</strong>: Apart from the sheer construction of personal power within the Chinese political system, how does Xi Jinping see the future evolution of China’s political structure? Here again, we’ve reached something of a tipping point in the evolution of Chinese politics since the return of Deng Xiaoping at the 3rd Plenum of the 11th Central Committee in November 1978.</p>
<p>There has been a tacit assumption, at least across much of the collective West over the last 40 years, that China, step-by-step, was embracing the global liberal capitalist project. Certainly, there was a view that Deng Xiaoping’s program of “reform and opening” would liberalise the Chinese economy with a greater role for market principles and a lesser role for the Chinese state in the economy. </p>
<p>A parallel assumption has been that over time, this would produce liberal democratic forces across the country which would gradually reduce the authoritarian powers of the Chinese Communist Party, create a greater plurality of political voices within the country, and in time involve something not dissimilar to a Singaporean-style “guided democracy”, albeit it on a grand scale. Despite the global wake-up call that was Tiananmen in 1989, by and large this continued to be the underlying view across the West, always misguided in my view, that China, through many twists and turns, was still broadly on track to create a more liberal political system, if not to create any form of classical Western liberal democracy.</p>
<p>Many scholars failed to pay attention to the internal debates within the Party in the late 1990s, where internal consideration was indeed given to the long-term transformation of the Communist Party into a Western-style social democratic party as part of a more pluralist political system. The Chinese were mindful of what happened with the collapse of the Soviet Union. They also saw the political transformations that unfolded across Eastern and Central Europe. Study groups were commissioned. Intense discussions held. They even included certain trusted foreigners at the time. I remember participating in some of them myself. Just as I remember my Chinese colleagues telling me in 2001-2 that China had concluded this debate, there would be no systemic change, and China would continue to be a one-party state. It would certainly be a less authoritarian state than the sort of totalitarianism we had seen during the rule of Mao Zedong. But the revolutionary party would remain. </p>
<p>The reasons were simple. The Party’s own institutional interests are in its long-term survival: after all, they had won the revolution, so in their own Leninist worldview, why on earth should they voluntarily yield power to others? But there was a second view as well. They also believed that China could never become a global great power in the absence of the Party’s strong central leadership. And that in the absence of such leadership, China would simply dissipate into the divided bickering camps that had often plagued the country throughout its history. The Communist Party would continue, therefore, as an unapologetically Leninist party for the future.</p>
<p>To be fair to Xi Jinping, it should be noted for the historical record that these internal debates were concluded a decade before Xi’s rise to power. The rise of Xi Jinping should not be interpreted simplistically as the sudden triumph of authoritarianism over democracy for the future of China’s domestic political system. That debate was already over. Rather it should be seen as a definition of the particular form of authoritarianism that China’s new leadership now seeks to entrench. </p>
<p>I see this emerging political system as having three defining characteristics. First, the unapologetic assertion of the power, prestige and prerogatives of the Party apparatus over the administrative machinery of the state. In previous decades, the role of the Party apparatus had shrunk to a more narrowly defined, ideological role. The powers of detailed policy decision-making had gradually migrated to the institutions of the state council. This indeed had been a signature reform under Premier Zhu Rongji. </p>
<p>That is no longer the case. Xi Jinping has realised that if you remove the Party as an institution from continued structural relevance to the country’s real policy decision-making process, the party over time would literally fade away. As a person who believes deeply not just in the Party’s history, but also the Party’s future, Xi has not been prepared to stand idly by while that happened. Xi has now intervened decisively to reverse this trend. </p>
<p>A second defining feature of this “new authoritarian” period is the role of political ideology over pragmatic policy. For the previous forty years, we’ve been told that China’s governing ideology was “Socialism with Chinese Characteristics”. As the decades rolled by, at least in the economy, there was much less “socialism” than there were “Chinese characteristics”. In this sense, “Chinese characteristics” became the accepted domestic political euphemism for good old capitalism.</p>
<p>Few people seemed to have understood that a core part of Xi Jinping’s intellectual make-up is that he is a Marxist dialectician. This derives from the Hegelian principles of “thesis, antithesis and synthesis”. Or in Chinese Maoist terms: “Contradictions among the people”. This forms a deep part of Xi Jinping’s intellectual software. Indeed the importance which Xi attaches to this as an intellectual methodology led him to conduct two formal Politburo study sessions on both “historical materialism” and “dialectical materialism” in 2013 and 2015 respectively. As a dialectician, Xi Jinping is acutely conscious of the new social, economic and political forces being created by China’s “neo-liberal” economic transformation. He would also understand intuitively the challenges which these new forces would, over time, represent to the Party’s continuing Leninist hold on power.</p>
<p>Both he and the rest of the central leadership have read development economics. They are not deaf and dumb. They know what the international literature says: that demands for political liberalisation almost universally arise once per capita income passes a certain threshold. They are therefore deeply aware of the profound “contradiction” which exists between China’s national development priority of escaping the “middle income trap” on the one hand, and unleashing parallel demands for political liberalisation once incomes continue to rise on the other.</p>
<p>Xi Jinping’s response to this dilemma has been a reassertion of ideology. This has meant a reassertion of Marxist-Leninist ideology. And a new prominence accorded to ideological education across the entire Chinese system. But it’s more sophisticated than a simple unidimensional ideological response. At least since the 2008 Olympics, which pre-dated Xi’s ascendency, Chinese nationalism has also become a parallel mainstay in China’s broader ideological formation. This has continued and expanded under Xi Jinping. And it has been augmented by an infinitely more sophisticated propaganda apparatus across the country, which now fuses the imagery of the Chinese Communist Party and the Chinese nation into a combined Chinese contemporary political consciousness.</p>
<p>On top of this, we’ve also seen a rehabilitation of Chinese Confucianism as part of the restoration of Chinese historical narratives about, and the continuing resonance of, China’s “unique” national political forms. According to the official line, this historical, authoritarian, hierarchical continuity is what has differentiated China from the rest of the world. This Chinese “neo-Confucianism” is regarded by the party as a comfortable historical accompaniment to the current imperatives for a strong, modern Chinese state, necessary to manage the complex processes of the “Great Chinese Renaissance” of the future. </p>
<p>The short-hand form of the political narrative is simple: China’s historical greatness, across its dynastic histories, lay in a strong, authoritarian hierarchical Confucian state. By corollary, China’s historical greatness has never been a product of Western liberal democracy. By further corollary, China’s future national greatness will lie not in any adaptation of Western political forms, but instead through the modern adaptation of its own indigenous political legacy in the form of a Confucian, communist state.</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>Xi Jinping’s View of the Economy</strong>: A third characteristic of China’s “new authoritarianism”, although less clear than the first and second, is what is now emerging in the future direction of China’s economic program. We are all familiar with Deng Xiaoping’s famous axiom that “it doesn’t matter whether a cat is white or black, so long as it catches mice”. Just as we are familiar with his other exhortation, “it is indeed glorious to be rich”. These were followed by later exhortations by China’s apparatchik class to leave government service (xiahai) and go out into the world (zouchuqu). These simple axioms, as opposed to complex statements of ideology, provided the underlying guidance for the subsequent two generations of Chinese entrepreneurs, both at home and abroad. </p>
<p>In policy terms, China’s first phase of economic reform (1978-2012) was characterised by small-scale, local family enterprises, involved in light industry; low-wage, labour-intensive manufacturing for export; combined with high-level state investment in public infrastructure, including telecommunications, broadband, road, rail, port, power generation, transmission and distribution.</p>
<p>In early 2013, at the 3rd plenum of the 18th Central Committee, Xi Jinping released a new blueprint for the second phase of China’s economic reform program, or what was ominously called “The Decision”, or more elegantly China’s “New Economic Model”. Its defining characteristics were a new emphasis on the domestic consumption market rather than exports as the principal driver of future economic growth; the explosion of China’s private sector at the expense of the overall market share of China’s state owned enterprises, which were to be constrained to certain, critical strategic industry sectors; the flourishing of the services sector, particularly through the agency of digital commerce; “leapfrogging” the West in critical new technology sectors, including biotechnology, and artificial intelligence; and all within the new framework of environmentally sustainable development, particularly air pollution and climate change.</p>
<p>It’s important to track over the last five years what progress and regress has occurred across the 60 specific reform measures articulated in the decision of March 2013. The core organising principle across the reform program was that “the market would play the decisive role” across China’s economic system. The Asia Society Policy Institute, of which I am President, in collaboration with the Rhodium Group, has been producing over the last six months the “China Economic Dashboard”, which looks in detail at the ten core barometers of economic change. What we have concluded is that China has made progress in two of these. First, in innovation policy, where China has made measurable strides, both in policy direction but more critically, in defiance of the usual skepticism about China’s capacity to innovate, in actual economic performance. </p>
<p>Second, we also measured progress in Chinese environmental reforms, in particular the reduction in the PMI measures of air pollution across China’s major cities over the last two years. However, in five of ten areas, we’ve seen China at best marking time: investment, trade, finance, SOE and land reform. And finally, in fiscal policy, competition policy and labour reform, we see evidence of China sliding backwards against the reform direction it set for itself five years ago. Each of these are the subject of considerable debate across the Chinese economic analytical community, particularly given the perennial problems we all face with data. Nonetheless, only the bravest official commentators in China could now point to 2013-18 as a path-breaking period of economic reform. It has at best been slow.</p>
<p>This brings into sharp relief the content of the government work report on the economy delivered at the National People’s Congress in Beijing in March 2018. Once again, precisely five years down the track from the original documents, the analytical community will pore over the entrails to analyse whether the spirit of market-based reforms continues to flourish for the future. Or whether it has begun to fade amidst a more general Chinese political and ideological redirection to the left. Or just as problematically, for economic reform to die at the implementation level because of confusing political and policy signals from the centre, meaning that it is much safer to just keep your head down. Or because there are limited local incentives, either personal or institutional, to actively prosecute reform which inevitably generates local conflict with deeply entrenched vested interests. Or, more likely, an unholy cocktail of the above, collectively reinforcing a natural predisposition towards bureaucratic inertia. </p>
<p>Certainly those at the centre of China’s economic reform team, including Wang Qishan, Liu He and Wang Yang, understand the absolute imperatives of implementing this next round of economic reform. They know from bitter experience that to stand still is in fact to go backwards. And they understand in particular that the only source of employment growth in China’s economy over the last five years has come from the private sector, not SOEs, as China each year is required to absorb 20 million new workers into its labour force.</p>
<p>Nonetheless, there have been worrying signs. First, the role of Party secretaries within private firms now seems to have been enhanced. Second, there is now an open debate in China as to whether the state should acquire equity within China’s most successful private firms in order to secure broad representation and greater political influence over these companies’ future direction. And third, in the wake of the anti-corruption campaign and other compliance irregularities, we now see a number of prominent Chinese private firms in real political difficulty, and in one case, Anbang, the temporary “assumption of state control” of the company’s assets after its Chairman and CEO was taken into custody.</p>
<p>Compounding all of the above is still a continuing lack of truly independent commercial courts and arbitration mechanisms. The complication this creates is whether this leads over time to a private capital strike, or a flight of private capital of the type we have seen over the last several years, resulting in a re-imposition of formal capital controls by the state.</p>
<p>So on the future direction of China’s economy, the jury is still out. Have we also reached a new “tipping point”, as we appear to have done in Chinese politics? Or will this be a more sophisticated Chinese play, consistent with one of the deeper aphorisms of Chinese politics, that “in order to go right on the economy, you must go left on politics” in order to sustain to internal “balance” of the system? The next 12 months with China’s new economic team will be critical. </p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>CHINA’S “WORLDVIEW” UNDER XI JINPING</strong></p>
<p><strong>Seven Core Priorities</strong>: There is always a danger facing foreign policy and security policy specialists when they seek to understand and define the capabilities, strategy and worldview of other states. There is always a temptation, given the analytical disciplines we represent, to see these “external” manifestations of state behaviour in the international realm as independent phenomena. The reality is that any country’s worldview is as much the product of its domestic politics, economics, culture and historiography, as it is the product of the number of guns, tanks and bullets held by ourselves, and by those around us.</p>
<p>That’s why I’ve sought to emphasise in this presentation so far the domestic drivers that underpin China’s emerging worldview. It’s important to bear in mind that those who ultimately shape Chinese strategy, like American strategy, are those who are equally engaged in the domestic affairs of their nations. There is no longer a clinical distinction between the foreign and domestic, the international and the national. Therefore understanding the domestic imperatives of China’s leadership is the beginning of wisdom in understanding the emerging patterns of China’s foreign and security policy behaviour.</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>The Party</strong>: China’s emerging worldview, in my own estimation, is best understood as a set of seven concentric circles. The first concentric circle is the Chinese Communist Party itself and its overriding interest to remain in power. This Leninist reality should never be forgotten. It is radically different from the worldview of Western political parties, who while always determined to remain in electoral power while they possibly can, also understand there is a natural ebb and flow in our national political discourse, intermediated by the electoral process.</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>National Unity</strong>: The second concentric circle, in terms of the core interests of the Chinese leadership, is the unity of the motherland. This may seem a hackneyed phrase in the West. But it remains of vital concern in Beijing, both as a question of national security on the one hand, and a question of enduring political legitimacy on the other. From Beijing’s perspective, Tibet, Xinjiang, Inner Mongolia and Taiwan represent a core set of security interests. Each within itself represents a confluence of external and internal security factors. Tibet is a central factor in Chinese perceptions of its strategic relationship with India. Xinjiang represents China’s gateway to what it perceives to be an increasingly hostile Islamic world, reinforced by concerns about its own, home-grown Islamic separatist movement. Inner Mongolia, despite the resolution of the common border with Russia decades ago, represents a continuing source of strategic anxiety between China and Russia. Taiwan, long seen as an American aircraft carrier in the Pacific, represents in the Chinese strategic mind a grand blocking device against China’s national aspirations for a more controlled, and therefore more secure maritime frontier, as well as an impediment to the ultimate political holy grail of national re-unification. These “internal” security challenges will always remain China’s core security challenges, apart, of course, from the security of the Party itself.</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>The Economy and Environmental Sustainability</strong>: The third in this series of concentric circles is the economy, together with its strategic counterfoil, environmental sustainability. I’ve already referred at some length to the current dilemmas in Chinese economic policy. Parallel dilemmas also confront the leadership over the litany of stories which permeate its own media on water, land and air pollution, and the inadequacy of food quality standards. The tragedy of China’s rapid economic development over the first 35 years was the relegation of the environment. Indeed, the systematic treatment of the environment as simply an “economic externality” to the Chinese development process led to wholesale environmental destruction. China is now paying the price.</p>
<p>Of course, these are not just domestic concerns for the Chinese people themselves. The quantum of China’s greenhouse gas emissions is of fundamental relevance to the future of global climate security and therefore of the planet itself. Indeed, if China fails to deliver on its future commitments on GHG reductions, as America and my own country Australia are now failing to do, by the time you students of the academy are taking your grandchildren to school during the last quarter of this century, the climate will represent the single greatest security threat to us all. But within the framework of China’s current and emerging worldview, both a strong economy and clean environment represent core determinants of the Party’s future political legitimacy.</p>
<p>These existential questions, therefore, of clean water, useable land, uncontaminated fish stocks, clean air to breathe as well as continued jobs growth, increased living standards, and all within the constraints of an ageing population, represent the daunting, day-to-day challenges of China’s Communist Party leadership.</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>China’s Neighbouring States-Securing China’s Continental Periphery across Eurasia</strong>: The fourth in this widening series concentric circles relates to China’s fourteen neighbouring states. Neighbouring states occupy a particular place in China’s strategic memory. Historically, they’ve been the avenue through which China’s national security has been threatened, resulting in successive foreign invasions. From the Mongols in the North in the 12th century, to the Manchurians in the North East in the mid-17th century, to the British, French, the Western imperial powers including the United States, and then the absolute brutality of the Japanese occupation from the East.</p>
<p>In Chinese traditional strategic thought, this has entrenched a deeply defensive view of how to maintain China’s national security. But Chinese historiography also teaches that purely defensive measures have not always succeeded. The failure of the Great Wall of China to provide security from foreign invasion is a classic case in point. </p>
<p>For these reasons, modern Chinese strategic thinking has explored different approaches. First and foremost, through political and economic diplomacy, China wishes to secure positive, accommodating, and wherever possible compliant relationships with all its neighbouring states.</p>
<p>But beyond that, China is also in search of its own form of strategic depth. We see this in China’s political, economic and military diplomacy across its vast continental flank from Northeast, through Central to Southeast Asia. We see this thinking alive in the Shanghai Cooperation Organisation. We see it alive in the Conference on International Confidence Building in Asia (CICA). We see it also with the Continental Silk Road, and the Maritime Silk Road initiative which charts its course across the Indian Ocean to the Red Sea and now the Mediterranean. And beyond that we see the Belt and Road Initiative, or BRI. The strategic imperative is clear: to consolidate China’s relationships with its neighbouring states. And by and large, this means enhancing its strategic position across the Eurasian continent, thereby consolidating China’s continental periphery.</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>China’s Maritime Periphery-East Asia and the West Pacific</strong>: The fifth concentric circle, or arguably its co-equal fourth, lies on China’s maritime periphery, across East Asia and the West Pacific. Unlike its continental periphery, China sees its maritime periphery as deeply hostile. It sees its traditional territorial claims in the East and South China Seas as under threat, and now routinely refers to these as China’s “core national interests”, placing them in a similar category to Taiwan. China also sees the region as strategically allied against it—with a ring of US allies from South Korea to Japan to Taiwan to the Philippines and onto Australia. Beyond this ring of US allies, the Chinese are fundamentally fixated on the formidable array of US military assets deployed by US Pacific Command across the entire region. </p>
<p>China’s strategy in response to this is clear. It seeks to fracture US alliances and has said as much repeatedly in its declaratory statements. Its position is that these alliances are relics of the Cold War. China’s deepest strategic concern about the peaceful reunification of North Korea lies in potentially having a unified Korean Peninsula, as a US ally, positioned on its immediate land border. China’s deeper response to its strategic circumstances is to enhance the capability of its navy and air force. Under Xi Jinping, the change in China’s military organisation, doctrine and force structure has been profound. The army continues to shrink. The navy and air force continue to expand.</p>
<p>Chinese naval and air capabilities now extend to reclaimed islands in the South China Sea. China’s naval and air expansion has also been enhanced by the rapid development of its land-based missile force targeted at both Taiwan and wider US naval operations in the Western Pacific. The strategic rationale is clear: a strategy of air-sea denial against US forces seeking to sustain large-scale US military operations in support of Taiwan, its partners in the South China Sea, and ultimately in the East China Sea as well. China’s overall political-military strategy is clear: to cause sufficient doubt in the minds of PACOM, and therefore any future US administration as to the “winnability” of any armed conflict against Chinese forces within the first island chain. And that includes American doubts over its ability to defend Taiwan.</p>
<p>The softer edge of China’s strategy in East Asia and the Western Pacific is economic engagement through trade, investment, capital flows and development aid. China’s strategy in this region, as in elsewhere in the world, is to turn itself into the indispensable economic power. In many countries and regions in the world, it has made great progress on this score. This, in many respects, is a simple projection of the scale of the Chinese economy as economic growth continues and China remains on track to pass the United States as the world’s largest economy over the course of the next decade.</p>
<p>The bottom line is this: in both reality and in perception, China has already become a more important economic partner than the United States to practically every country in wider East Asia. We all know where the wider strategic logic takes us. From economic power proceeds political power; from political power proceeds foreign policy power; and from foreign policy power proceeds strategic power. That is China’s strategy.</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>China and the Developing World</strong>: The sixth in my attempted visual image of China’s order of strategic priorities is China’s particular relationship with the developing world. This has long historical roots going back to Mao and Zhou Enlai’s role in the non-aligned movement. It applies particularly in Africa. But we also see it in countries like Pakistan, Sri Lanka and Bangladesh. China’s relationship with the developing world has long been seen as a pillar in the prosecution of its global interests and values. In the current period this has continued with large-scale public and private Chinese trade and investment across Africa, Asia and Latin America.</p>
<p>Across Africa, China has laid out large slabs of the continent’s emerging infrastructure. Each of these projects is generating its own local controversies. But the remarkable thing about China’s strategy is its persistence and its ability to adapt and adjust over time. Multiple field studies have now been conducted by Western academics on Chinese investment projects in the developing world. Some have not been good. But what is remarkable is how many positive stories are also emerging, on balance. So when China looks for local voices to support its interests, either in the United Nations or across the labyrinth of the global multilateral system, its ability to pull in political and diplomat support is unprecedented.</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>China and the Global Rules-based Order</strong>: The seventh and final concentric circle concerns the future of the global rules-based order itself. The United States, combined with its allies, as the victors of the Second World War, constructed the underlying architecture of the post-war, liberal international rules-based order. We saw this at Bretton Woods in 1944, the emergence of the IMF, the World Bank and the General Agreement on Tariffs and Trade, later the WTO. We saw it in 1945 with the UN Charter. We saw it in 1948 with the Universal Declaration of Human Rights.</p>
<p>The United States also sought to defend the order it had created with a global network of alliances: NATO in Europe, and bilateral security alliances across East Asia. Across all this, even during the Cold War, the United States remained the dominant superpower. Dominant politically, economically, and militarily. Now we find ourselves in a period of great change and challenge.</p>
<p>Our Western political systems are under challenge in terms of their own domestic legitimacy. China will soon replace the United States as the world’s largest economy. China will begin to challenge US regional but not global military dominance. China is also creating its own new multilateral institutions outside the UN framework, such as the AIIB. China also continues to expand its strategic and economic reach across Europe and Asia. And Xi Jinping has made plain he does not see China’s role as simply replicating the current US-led liberal international order for the future.</p>
<p>China has consistently said that this was an order created by the Western, victorious, and by-and-large colonial powers after the Second World War. But China leaves open what future changes it may make to the international rules-based system in the future. The desirability of having a form of rules-based system, rather than simple chaos, lies deep within Chinese political consciousness. Chaos is utterly alien to China’s preferred political approach. But it is important to remember that “order”, the alternative to “chaos”, will not necessarily be an American order, or for that matter a liberal international order of America’s making, where Chinese co-leadership of that order may now be expected or desired.</p>
<p>China’s expectation of the future of the order will be one which is more suited to China’s own national interests and values. This means China will want to change things. At this stage, it is not clear how much China wants to change things. And whether the rest of the international community will agree. This will have implications, for example, for the current international order on human rights, anchored in the three current international treaties and the human rights council in Geneva. It will also have implications for the future international economic order, including the WTO, particularly in the aftermath of any unfolding trade war with the United States. As for the future international security order, we now find ourselves in completely uncertain terrain for reasons increasingly shaped by the future contours of both American and Chinese domestic politics. </p>
<p>There is much public debate about Thucydides’ Trap on the probability of conflict between China and the United States. Just as there is now debate about the Kindleberger Trap, drawn from the experience of the 1920s and 1930’s, when we saw the emergence of strategic vacuum through the global retrenchment of the United Kingdom and an unwillingness of the United States to fill that vacuum in the provision of global public goods. The result was global anarchy of a different sort. My deepest belief is that we must avoid both these traps. Our deepest wisdom must be harnessed in defining another path. </p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p><strong>CONCLUSION</strong></p>
<p>There are many reasons to study China. It is an extraordinary civilisation in its own right. It contains deep wisdom, generated over more than 4000 years of recorded history. China’s aesthetic tradition is also rich beyond all measure. It is easy to become lost in the world of Sinology. But the rise of China demands of us all a New Sinology for the 21st century.</p>
<p>One which is familiar with the Chinese tradition. One which is clear in its analysis of contemporary Chinese politics, economics, society and China’s unfolding role in the region and the world. As well as a New Sinology which is capable of synthesising the above.</p>
<p>We will need a generation of leaders who understand this integrated Chinese reality, in order to make sense of and engage with the China of the future. With our eyes wide open. And with our minds wide open as well. Open to new challenges. Open to new threats. Open to new possibilities. Open to new areas of cooperation and collaboration.</p>
<p>And above all, open to finding creative paths about how we preserve peace, preserve stability, avoid conflict and the scourge of war between these two great nations, while preserving the universal values, anchored in our international covenants, for which we all still stand.</p>
</blockquote>
</div>
tag:typepad.com,2003:post-6a00e551f08003883401b8d2dcbeea970c2018-03-18T15:42:41-07:002018-03-18T15:45:02-07:00**Should-Read**: **Jason Del Rey**: [Amazon is creating a health care company with the help of Warren Buffett and JPMorgan Chase](https://www.recode.net/2018/1/30/16949654/amazon-jeff-bezos-health-care-company-warren-buffett-jpmorgan-chase): "Amazon... plans to work with Warren Buffett’s Berkshire Hathaway and JPMorgan Chase to create a new health care company... >...with the aim of “reducing healthcare’s burden on the economy while improving outcomes for employees and their families.... [The] initial focus... will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.” The announcement proclaimed that the company would be “free from profit-making incentives and constraints,” but an Amazon spokesperson declined to comment on whether the entity would be a nonprofit.... Even without many details, the news had an immediate impact on sector leaders; UnitedHealth’s stock was down 7 percent in pre-market trading, while Anthem and Cigna each fell 5 percent...J. Bradford DeLong

...with the aim of “reducing healthcare’s burden on the economy while improving outcomes for employees and their families.... [The] initial focus... will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.” The announcement proclaimed that the company would be “free from profit-making incentives and constraints,” but an Amazon spokesperson declined to comment on whether the entity would be a nonprofit.... Even without many details, the news had an immediate impact on sector leaders; UnitedHealth’s stock was down 7 percent in pre-market trading, while Anthem and Cigna each fell 5 percent...

tag:typepad.com,2003:post-6a00e551f08003883401bb09fc6998970d2018-03-18T08:17:57-07:002018-03-18T08:17:57-07:00**Should-Read**: **Pamela Jakiela and Owen Ozier**: [Gendered Language](https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=CSAE2018&paper_id=397): "Gender languages assign many—sometimes all—nouns to distinct sex-based categories, masculine and feminine... >...Drawing on a broad range of historical and linguistic sources, we estimate the proportion of each country’s population whose native language is a gender language. At the cross-country level, we document a robust negative relationship between prevalence of gender languages and women’s labor force participation. We also show that traditional views of gender roles are more commons in countries with more native speakers of gender languages. In African countries where indigenous languages vary in terms of their gender structure, educational attainment and female labor force participation are lower among those whose native languages are gender languages. Cross-country and individual-level differences in labor force participation are large in both absolute and relative terms (when women are compared to men), suggesting that the observed patterns are not driven by development or some unobserved aspect of culture that affects men and women equally. Following the procedures proposed by Altonji, Elder, and Taber (2005) and Oster (forthcoming), we show that the observed correlations are unlikely to be driven by unobservables. Gender languages appear to reduce women’s labor force participation...J. Bradford DeLong

...Drawing on a broad range of historical and linguistic sources, we estimate the proportion of each country’s population whose native language is a gender language. At the cross-country level, we document a robust negative relationship between prevalence of gender languages and women’s labor force participation. We also show that traditional views of gender roles are more commons in countries with more native speakers of gender languages. In African countries where indigenous languages vary in terms of their gender structure, educational attainment and female labor force participation are lower among those whose native languages are gender languages. Cross-country and individual-level differences in labor force participation are large in both absolute and relative terms (when women are compared to men), suggesting that the observed patterns are not driven by development or some unobserved aspect of culture that affects men and women equally. Following the procedures proposed by Altonji, Elder, and Taber (2005) and Oster (forthcoming), we show that the observed correlations are unlikely to be driven by unobservables. Gender languages appear to reduce women’s labor force participation...

Creating Your Own Private Internet Intellectual Elysiumtag:typepad.com,2003:post-6a00e551f08003883401b7c9591de3970b2018-03-17T19:17:03-07:002018-03-17T19:17:03-07:00[Absolutely brilliant from Henry Farrell](http://www.bradford-delong.com/2018/03/should-read-absolutely-brilliant-from-henry-farrell-if-being-muted-by-jonathan-chait-were-to-regularly-produce-such-goo.html): If being muted by Jonathan Chait were to regularly produce such good thought, Chait should mute everybody immediately!: >**Henry Farrell**: WE’RE ALL GOING TO NEED SAFE SPACES: Speech doesn’t scale, and at a certain point, the scarce resource isn’t speech but attention. Even when people who want to argue with you are entirely sincere, there is a point at which you simply can’t pay attention to everyone who wants to talk at you on Twitter and still function. You need to make choices. Second, speech is increasingly being weaponized to drown out inconvenient voices... making online political conversation more or less impossible in authoritarian regimes... tendentious, irrelevant, and angry comments... a “flood of fake content, seeding doubt and paranoia, and destroying the possibility of using the Internet as a democratic space” (in passing, I used to be very strongly in favor of anonymous free speech on the Internet; I’ve had to seriously rethink that). In the standard shibboleth, the best antidote to bad speech is more speech. What Putin’s Russia and Xi’s China have discovered is that the best antidote to more speech is bad speech. And while there is a lot of paranoia about...J. Bradford DeLong

Henry Farrell: WE’RE ALL GOING TO NEED SAFE SPACES: Speech doesn’t scale, and at a certain point, the scarce resource isn’t speech but attention. Even when people who want to argue with you are entirely sincere, there is a point at which you simply can’t pay attention to everyone who wants to talk at you on Twitter and still function. You need to make choices. Second, speech is increasingly being weaponized to drown out inconvenient voices... making online political conversation more or less impossible in authoritarian regimes... tendentious, irrelevant, and angry comments... a “flood of fake content, seeding doubt and paranoia, and destroying the possibility of using the Internet as a democratic space” (in passing, I used to be very strongly in favor of anonymous free speech on the Internet; I’ve had to seriously rethink that). In the standard shibboleth, the best antidote to bad speech is more speech. What Putin’s Russia and Xi’s China have discovered is that the best antidote to more speech is bad speech. And while there is a lot of paranoia about Russian bots, there was, I think, a very real attempt to use these techniques to stir things up in the US election, and in Western European countries too...

My test for my RSS and Twitter feeds is:

Is this person who has just shown up in my timeline the:

smartest

knowledgeable

well-intentioned

interesting

person who is right now writing about:

an important issue

that I care about

at a level and in a mode I can understand

?

(Some people would add “kind“, but I find that people who lean over to Fargo be kind call their punches and require one to spend too much work in Aesopian readings.)

If yes, read on. If no, skip. If no and they are annoying, mute. If no and they keep showing up in my timeline, mute. If they still keep showing up in my timeline, block.

This produces a very interesting and useful individual feed. By now the combination of my RSS and Twitter feeds is truly an intellectual Elysium.

The problem is that it does nothing to produce a functioning intellectual community. And that is what we really need: we are smart when we are part of a functional anthology intelligence. We are dumb when we are off on our own. And we are very dumb when we are part of a dysfunctional combination clown circus and shit show—and there are a lot of people speaking out there who get money or status or pleasure from trying to create dysfunctional combination clown circuses and shit shows.

No, I do not have an answer...

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e35141970c2018-03-17T18:24:08-07:002018-03-17T18:24:08-07:00**Should-Read**: **Brad DeLong** (2012): [Ahem! Niall Ferguson Fire-His-Ass-from-NewsBeast-Now Department](http://delong.typepad.com/sdj/2012/08/more-lies-from-niall-ferguson.html): Niall Ferguson writes: >**Paul Krugman Is Wrong**: In my piece I say: "The president pledged that health-care reform would not add a cent to the deficit. But the CBO and the Joint Committee on Taxation now estimate that the insurance-coverage provisions of the ACA will have a net cost of close to $1.2 trillion over the 2012–22 period..." >I very deliberately said “the insurance coverage provisions of the ACA,” not “the ACA.” There is a big difference. 1. The "But" at the start of the second sentence in the quote tells readers that Obama has violated his pledge—that he promised that the ACA would not increase the deficit, but that it did. 2. The rest of the second sentence explains how Obama violated his pledge—by including insurance-coverage provisions that have a net cost of nearly 1.2 trillion dollars over 2012-22 A reader who trusted Ferguson--and I hope no such readers will exist by the end of today--would tell you that Ferguson's quote says: * Obama pledged that the ACA would not increase the deficit. * Obama broke his pledge. * The ACA increased the deficit by $1.2 trillion. Now comes Ferguson...J. Bradford DeLong

Paul Krugman Is Wrong: In my piece I say: "The president pledged that health-care reform would not add a cent to the deficit. But the CBO and the Joint Committee on Taxation now estimate that the insurance-coverage provisions of the ACA will have a net cost of close to $1.2 trillion over the 2012–22 period..."

I very deliberately said “the insurance coverage provisions of the ACA,” not “the ACA.” There is a big difference.

The "But" at the start of the second sentence in the quote tells readers that Obama has violated his pledge—that he promised that the ACA would not increase the deficit, but that it did.

The rest of the second sentence explains how Obama violated his pledge—by including insurance-coverage provisions that have a net cost of nearly 1.2 trillion dollars over 2012-22

A reader who trusted Ferguson--and I hope no such readers will exist by the end of today--would tell you that Ferguson's quote says:

Obama pledged that the ACA would not increase the deficit.

Obama broke his pledge.

The ACA increased the deficit by $1.2 trillion.

Now comes Ferguson to tell us that his "But" at the start of the second sentence in the quote is completely, totally, and deliberately false.

Now comes Ferguson to tell us that he knows damned well that his "but" is a lie to mislead his readers—that it is a false claim that Obama broke his pledge and that the rest of the second sentence will tell us how Obama broke his pledge.

Now comes Ferguson to tell us that he knows that Obama kept his pledge to pay for health care reform.

...which I will not touch on other than to mention that, surprise of surprises, Ferguson utterly ignores the deficit-ballooning aspects of Ryan's budget plan, repeating the-can I call it a lie? pretty please?-mantra that Ryan is a fiscal conservative and deficit-cutter. So basically, what we have here is a pedestrian, poorly written, poorly-thought-out, self-contradictory, often counterfactual anti-Obama screed. But it is not enough for me to simply point this out. Instead, I want to examine why Niall Ferguson has thrown away the ancient Western traditions of logic and reason in a frenzy of partisan animus...

...it's a prime example of a syndrome I like to call Affordable Care Act Denialism where people criticize the recent health reform law for not doing things that it absolutely does do:

And then there was health care. No one seriously doubts that the U.S. system needed to be reformed. But the Patient Protection and Affordable Care Act (ACA) of 2010 did nothing to address the core defects of the system: the long-run explosion of Medicare costs as the baby boomers retire, the “fee for service” model that drives health-care inflation, the link from employment to insurance that explains why so many Americans lack coverage, and the excessive costs of the liability insurance that our doctors need to protect them from our lawyers...

Welcome to Obama’s America: nearly half the population is not represented on a taxable return—almost exactly the same proportion that lives in a household where at least one member receives some type of government benefit. We are becoming the 50–50 nation—half of us paying the taxes, the other half receiving the benefits.

There are people willing to assert that the only taxes people pay are federal income taxes. There are people who have some business being paid to write essays. And there’s certainly no overlap between these two categories.

I could proceed to talk about his ridiculous claims that the ACA did nothing to address Medicare costs (oddly, the candidate Ferguson favors seems unaware of this), or his foolish assertions about Paul Ryan, but really, after that addressing his argument further would be superfluous. It’s a Renew America column with a marginally larger vocabulary.

Incidentally, Ferguson shows up in Annie Lowrey’s piece about conservative “intellectuals” who are bowled over by Paul Ryan. It seems odd that a transparent fraud like Ryan could get the reputation as some sort of wonk, but when you see what passes for an intellectual in Republican circles it starts to make sense...

tag:typepad.com,2003:post-6a00e551f08003883401b7c9553201970b2018-03-17T14:07:49-07:002018-03-18T16:50:49-07:00**Should-Read**: **Lane Kenworthy**: [Soci 109: Analysis of Sociological Data (2015)](https://lanekenworthy.net/soci109-2015/): "This course introduces you to techniques and software for analyzing quantitative social science data... >I’ll emphasize the following: Ask a good research question. Measure. Describe. Graph. Compare. Control. Pay attention to the magnitude, not just the existence, of effects. Where possible, use multiple types of data. Don’t infer causation from correlation alone. Be thorough. Be skeptical. Admit your uncertainty. Write clearly and simply. The course readings, videos, and data sets are available via the links below at no cost. You’ll need to purchase access to Stata, a statistical software program. For this course you only need a six-month license for “Small Stata,” which is $35. (Small Stata allows 1,200 cases and 99 variables. If you’d like to be able to analyze larger data sets, you can get Stata IC.) Grading: eight short assignments 65%, research report 35%. Details are below. I’ll post grades on Ted. Everything else you need for the course — instructions, links, assignments—is in this online syllabus...J. Bradford DeLong

I’ll emphasize the following: Ask a good research question. Measure. Describe. Graph. Compare. Control. Pay attention to the magnitude, not just the existence, of effects. Where possible, use multiple types of data. Don’t infer causation from correlation alone. Be thorough. Be skeptical. Admit your uncertainty. Write clearly and simply. The course readings, videos, and data sets are available via the links below at no cost. You’ll need to purchase access to Stata, a statistical software program. For this course you only need a six-month license for “Small Stata,” which is $35. (Small Stata allows 1,200 cases and 99 variables. If you’d like to be able to analyze larger data sets, you can get Stata IC.) Grading: eight short assignments 65%, research report 35%. Details are below. I’ll post grades on Ted. Everything else you need for the course — instructions, links, assignments—is in this online syllabus...

tag:typepad.com,2003:post-6a00e551f08003883401bb09fc3582970d2018-03-17T08:53:25-07:002018-03-17T08:53:25-07:00**Should-Read**: Absolutely brilliant from Henry Farrell. If being muted by Jonathan Chait were to regularly produce such good thought, Chait should mute everybody immediately!: **Henry Farrell**: [We’re all going to need safe spaces](http://crookedtimber.org/2018/03/16/were-all-going-to-need-safe-spaces/#comment-728953): "Speech doesn’t scale, and at a certain point, the scarce resource isn’t speech but attention... >...Even when people who want to argue with you are entirely sincere, there is a point at which you simply can’t pay attention to everyone who wants to talk at you on Twitter and still function. You need to make choices. Second, speech is increasingly being weaponized to drown out inconvenient voices... making online political conversation more or less impossible in authoritarian regimes... tendentious, irrelevant, and angry comments... a “flood of fake content, seeding doubt and paranoia, and destroying the possibility of using the Internet as a democratic space” (in passing, I used to be very strongly in favor of anonymous free speech on the Internet; I’ve had to seriously rethink that). In the standard shibboleth, the best antidote to bad speech is more speech. What Putin’s Russia and Xi’s China have discovered is that the best antidote to more speech is bad speech. And while there is a lot of paranoia...J. Bradford DeLong

Should-Read: Absolutely brilliant from Henry Farrell. If being muted by Jonathan Chait were to regularly produce such good thought, Chait should mute everybody immediately!: Henry Farrell: We’re all going to need safe spaces: "Speech doesn’t scale, and at a certain point, the scarce resource isn’t speech but attention...

...Even when people who want to argue with you are entirely sincere, there is a point at which you simply can’t pay attention to everyone who wants to talk at you on Twitter and still function. You need to make choices. Second, speech is increasingly being weaponized to drown out inconvenient voices... making online political conversation more or less impossible in authoritarian regimes... tendentious, irrelevant, and angry comments... a “flood of fake content, seeding doubt and paranoia, and destroying the possibility of using the Internet as a democratic space” (in passing, I used to be very strongly in favor of anonymous free speech on the Internet; I’ve had to seriously rethink that). In the standard shibboleth, the best antidote to bad speech is more speech. What Putin’s Russia and Xi’s China have discovered is that the best antidote to more speech is bad speech. And while there is a lot of paranoia about Russian bots, there was, I think, a very real attempt to use these techniques to stir things up in the US election, and in Western European countries too...

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e33971970c2018-03-17T08:47:01-07:002018-03-17T08:47:01-07:00**Should-Read**: I think that the very sharp Jonathan Chait has this one right: **Jonathan Chait**: [Nancy Pelosi Is Good at Her Job and She Should Keep It.](https://nymag.com/daily/intelligencer/2018/03/nancy-pelosi-is-good-at-her-job-and-she-should-keep-it.html?utm_source=tw&utm_medium=s3&utm_campaign=sharebutton-t): "There is zero sign Pelosi’s age has impeded her work... >...She has not lost her persuasive talents: Pelosi effectively rallied the party to unanimously oppose the Trump tax cuts. If some Democrats had supported the measure, Republicans could have touted its bipartisan nature, which would in turn help reduce its unpopularity. Instead the health care and tax cuts have been a millstone around Republican necks. (Republicans initially tried attacking Conor Lamb for opposing the tax cuts, but abandoned that message, a telling concession in a heavily Republican district.) Last month, Pelosi delivered an eight-hour speech defending the Dreamers, standing the entire time, in heels, without a break, a feat of stamina I could not have matched at any point in my life. It may have been a stunt to display her vitality, but it was a convincing one. >Replacing Pelosi as leader would create the ephemeral benefit of forcing Republicans to rotate in a new cast of villains to star in their attack ads—MS-13? hippies? antifa?—until they could build up the name-ID for...J. Bradford DeLong

...She has not lost her persuasive talents: Pelosi effectively rallied the party to unanimously oppose the Trump tax cuts. If some Democrats had supported the measure, Republicans could have touted its bipartisan nature, which would in turn help reduce its unpopularity. Instead the health care and tax cuts have been a millstone around Republican necks. (Republicans initially tried attacking Conor Lamb for opposing the tax cuts, but abandoned that message, a telling concession in a heavily Republican district.) Last month, Pelosi delivered an eight-hour speech defending the Dreamers, standing the entire time, in heels, without a break, a feat of stamina I could not have matched at any point in my life. It may have been a stunt to display her vitality, but it was a convincing one.

Replacing Pelosi as leader would create the ephemeral benefit of forcing Republicans to rotate in a new cast of villains to star in their attack ads—MS-13? hippies? antifa?—until they could build up the name-ID for her successor. It would bring the significant downside of firing an elected official who is extremely good at her extremely important job...

tag:typepad.com,2003:post-6a00e551f08003883401b7c959030b970b2018-03-17T08:38:57-07:002018-03-17T08:38:57-07:00**Should-Read**: **FT**: [Thoughts for the weekend](https://ftalphaville.ft.com/2018/03/17/1521262542000/Thoughts-for-the-weekend/): "'To wit, Phil Gramm was right: We are in a mental recession, not an actual recession.' - 2008 comments from President Trump's new economic advisor [Larry Kudlow]..."J. Bradford DeLong

Should-Read: FT: Thoughts for the weekend: "'To wit, Phil Gramm was right: We are in a mental recession, not an actual recession.' - 2008 comments from President Trump's new economic advisor [Larry Kudlow]..."

tag:typepad.com,2003:post-6a00e551f08003883401bb09fc34ca970d2018-03-17T08:36:49-07:002018-03-17T08:36:49-07:00**Should-Read**: By and large a good statement. However, while free speech extends to statements made with "conscious indifference to their truth content", I do not believe that academic freedom does. Professors who make and reiterate and decide to die on the hill that is statements made with "conscious indifference to their truth content" are violating the norms of academic responsibility as much as those who commit plagiarism or falsify experimental results. I do not believe that the Trustees of the University of Pennsylvania should continue to employ Professor Wax: **Ted Ruger (Dean)**: [Lawyers, Guns & Money](http://www.lawyersgunsmoneyblog.com/2018/03/amy-wax-removed-teaching-required-first-year-courses-penn-law-school): "Dear members of the Penn Law community... >...I write to share with you information about a development of great concern to our intellectual and professional community. In the past two weeks, students and alumni have brought to my attention a number of public claims made last fall by one of our tenured faculty, Amy Wax, during a video interview. Specifically, Professor Wax stated that, “I don’t think I’ve ever seen a black student graduate in the top quarter of the class, and rarely, rarely in the top half.” Moreover, she claimed that the University of Pennsylvania Law Review, a prestigious law journal whose editorial...J. Bradford DeLong

Should-Read: By and large a good statement. However, while free speech extends to statements made with "conscious indifference to their truth content", I do not believe that academic freedom does. Professors who make and reiterate and decide to die on the hill that is statements made with "conscious indifference to their truth content" are violating the norms of academic responsibility as much as those who commit plagiarism or falsify experimental results. I do not believe that the Trustees of the University of Pennsylvania should continue to employ Professor Wax: Ted Ruger (Dean): Lawyers, Guns & Money: "Dear members of the Penn Law community...

...I write to share with you information about a development of great concern to our intellectual and professional community. In the past two weeks, students and alumni have brought to my attention a number of public claims made last fall by one of our tenured faculty, Amy Wax, during a video interview. Specifically, Professor Wax stated that, “I don’t think I’ve ever seen a black student graduate in the top quarter of the class, and rarely, rarely in the top half.” Moreover, she claimed that the University of Pennsylvania Law Review, a prestigious law journal whose editorial board is composed of Penn Law students, has a racial diversity mandate, suggesting that black students on Law Review had not earned their place. Speaking about black law students at Penn and peer schools, she went on to say that “some of them shouldn’t” even go to college.​

It is imperative for me as dean to state that these claims are false: black students have graduated in the top of the class at Penn Law, and the Law Review does not have a diversity mandate. Rather, its editors are selected based on a competitive process. And contrary to any suggestion otherwise, black students at Penn Law are extremely successful, both inside and outside the classroom, in the job market, and in their careers.

I want to make absolutely clear that Professor Wax, like every member of the faculty and the student body, is protected by Penn’s policies of free and open expression as well as academic freedom, and I will steadfastly defend the rights of Law School community members to openly express their views. This has been the position of the Law School throughout my tenure as dean, and before, and it is the consistent message I have articulated in handling protests involving provocative figures speaking on campus, student-led panels on controversial topics, and other free speech debates including those involving Professor Wax. I will maintain this position moving forward. Professor Wax enjoys the same status as every other tenured colleague here: her job, salary, seniority, and opportunity to teach a full load of courses remains secure. She is scheduled to teach a full course load in the next academic year....

Law schools are not free-standing debating societies or think tanks; we are also demanding professional schools dedicated to training hundreds of students each year.... Professor Wax has chosen to speak publicly, disparagingly, and inaccurately about the performance of these students, some of whom she has taught and graded confidentially at Penn Law. As a scholar she is free to advocate her views, no matter how dramatically those views diverge from our institutional ethos and our considered practices. As a teacher, however, she is not free to transgress the policy that student grades are confidential, or to use her access to those Penn Law students who are required to be in her class to further her scholarly ends without students’ permission. Penn Law does not permit the public disclosure of grades or class rankings, and we do not collect, sort, or publicize grade performance by racial group. The existence of these policies and practices, while constraining this response, is not an invitation to statements made with conscious indifference to their truth content...

tag:typepad.com,2003:post-6a00e551f08003883401bb09fc3157970d2018-03-17T07:40:04-07:002018-03-17T07:40:04-07:00**Should-Read**: **Iason Gabriel**: [The case for fairer algorithms](https://medium.com/@Ethics_Society/the-case-for-fairer-algorithms-c008a12126f8): "Software used to make decisions and allocate opportunities has often tended to mirror the biases of its creators, extending discrimination into new domains... >...Job search tools have been shown to offer higher paid jobs to men, a programme used for parole decisions mistakenly identified more black defendants as ‘high risk’ than other racial categories, and image recognition software has been shown to work less-well for minorities and disadvantaged groups.... A better understanding is needed of how bias enters algorithmic decisions.... The data used to train machine learning models is often incomplete or skewed.... Data... frequently contains the imprint of historical and structural patterns of discrimination.... Statistically unbiased and properly coded datasets... may still contain correlations between gender and pay, or race and incarceration, which stem from entrenched patterns of historical discrimination... Against this backdrop, it would be a serious mistake to think that technologists are not responsible for algorithmic bias or to conclude that technology itself is neutral.... >Even when explicit information about race, gender, age and socioeconomic status is withheld from models, part of the remaining data often continues to correlate with these categories, serving as a proxy for them.... Patterns...J. Bradford DeLong

Should-Read: Iason Gabriel: The case for fairer algorithms: "Software used to make decisions and allocate opportunities has often tended to mirror the biases of its creators, extending discrimination into new domains...

...Job search tools have been shown to offer higher paid jobs to men, a programme used for parole decisions mistakenly identified more black defendants as ‘high risk’ than other racial categories, and image recognition software has been shown to work less-well for minorities and disadvantaged groups.... A better understanding is needed of how bias enters algorithmic decisions.... The data used to train machine learning models is often incomplete or skewed.... Data... frequently contains the imprint of historical and structural patterns of discrimination.... Statistically unbiased and properly coded datasets... may still contain correlations between gender and pay, or race and incarceration, which stem from entrenched patterns of historical discrimination... Against this backdrop, it would be a serious mistake to think that technologists are not responsible for algorithmic bias or to conclude that technology itself is neutral....

Even when explicit information about race, gender, age and socioeconomic status is withheld from models, part of the remaining data often continues to correlate with these categories, serving as a proxy for them.... Patterns of discrimination intersect with each other, placing particular burdens on groups such as immigrants or single-parent families who conventionally fall outside the ‘protected category’ framework....

Be transparent about the limitations of datasets.... Conduct research and develop techniques to mitigate bias.... Deploy responsibly.... Increase awareness.... Research will contribute to our understanding of problem and potential solutions, but certain principles are already clear. We need new standards of public accountability.... And we need technologists to take responsibility for the impact of their work...

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e32092970c2018-03-16T20:35:54-07:002018-03-16T20:35:54-07:00**Should-Read**: This is not an economist's forecast. This is affinity fraud. Directed against Trump? Against Kudlow's Fox News viewers? Against some group of right-wing investors? In all cases, the hope is that the marks have short memories—or that something else will turn up. **Paul Bedard**: [Larry Kudlow predicts 4%-5% growth, 'investment boom'](https://www.washingtonexaminer.com/washington-secrets/larry-kudlow-predicts-4-5-growth-investment-boom): "Larry Kudlow, picked to be President Trump’s new economic adviser... >...has privately told the White House that the nation’s economy is on the verge of 4 percent to 5 percent growth, or more than double the last decade. In a recent gathering with Trump, he said that many firms held back investing until the tax reform package passed and “some of that is already showing up.” What’s more, he told the president, “We’re on the front end of the biggest investment boom in probably 30 to 40 years.” The president responded, “Well, I couldn’t have said it any better”... The rule-of-thumb is that each 1% point rise in investment as a share of national product adds 0.1% point to the annual growth rate. To get from a growth rate of 2.5% up to 4.5% would thus require a 20% point jump in the investment share of national product—if...J. Bradford DeLong

Should-Read: This is not an economist's forecast. This is affinity fraud. Directed against Trump? Against Kudlow's Fox News viewers? Against some group of right-wing investors? In all cases, the hope is that the marks have short memories—or that something else will turn up. Paul Bedard: Larry Kudlow predicts 4%-5% growth, 'investment boom': "Larry Kudlow, picked to be President Trump’s new economic adviser...

...has privately told the White House that the nation’s economy is on the verge of 4 percent to 5 percent growth, or more than double the last decade. In a recent gathering with Trump, he said that many firms held back investing until the tax reform package passed and “some of that is already showing up.” What’s more, he told the president, “We’re on the front end of the biggest investment boom in probably 30 to 40 years.” The president responded, “Well, I couldn’t have said it any better”...

The rule-of-thumb is that each 1% point rise in investment as a share of national product adds 0.1% point to the annual growth rate. To get from a growth rate of 2.5% up to 4.5% would thus require a 20% point jump in the investment share of national product—if you were to get it from investment.

If you were to get it from employment growth, with Okun's Law, you would need the unemployment rate to fall by 1% point per year—which means the unemployment rate would hit zero by the start of 2022. And there are no signs of a productivity growth recovery: given demography, labor productivity growth would have to consistently hit 3.75% per year in order to get to 4.5% per year real GDP growth. And that is something that the U.S. economy simply does not do:

It just does not add up.

tag:typepad.com,2003:post-6a00e551f08003883401bb09fa2d10970d2018-03-16T18:52:50-07:002018-03-16T18:52:50-07:00**Should-Read**: **Robert Waldmann**: [A Dynamic Macroeconomic Model with Downward Nominal Rigidity II](https://docs.google.com/viewer?a=v&pid=sites&srcid=ZGVmYXVsdGRvbWFpbnxyb2JlcnR3YWxkbWFubnxneDo0ZDM1M2U5ZmVjMzAxODhj): "This note explores the implications of downward nominal rigidity... >...To make things clear and simple, I will assume absolute downward nominal rigidity so prices and nominal wages are never cut. This is simply assumed with a nod at US data and not explained. Downward nominal rigidity is quite different from standard assumptions about sticky wages and prices in which wage and price setting is slow but takes expected inflation into account. Downward nominal rigidity implies indeterminate equilibrium with a continuum of outcomes possible for given tastes and technology. It is possible for the economy to fall into a liquidity trap for no particular reason, and it is possible for the economy to escape from that trap for no particular reason...J. Bradford DeLong

...To make things clear and simple, I will assume absolute downward nominal rigidity so prices and nominal wages are never cut. This is simply assumed with a nod at US data and not explained. Downward nominal rigidity is quite different from standard assumptions about sticky wages and prices in which wage and price setting is slow but takes expected inflation into account. Downward nominal rigidity implies indeterminate equilibrium with a continuum of outcomes possible for given tastes and technology. It is possible for the economy to fall into a liquidity trap for no particular reason, and it is possible for the economy to escape from that trap for no particular reason...

Misapplied History...tag:typepad.com,2003:post-6a00e551f08003883401b7c92ae1eb970b2018-03-16T18:50:49-07:002018-03-16T20:05:20-07:00I confess that I am a great fan of Applied History. Theoretical arguments and conceptual frameworks are, ultimately, nothing but distilled, crystalized, and chemically cooked history. After all, what else could they possibly be? And it is very important to know whether the distillation, crystallization, and chemical cooking processes that underpin the theory and made the conceptual frameworks were honest ones. And that can be done only by getting good historians into the mix—in a prominent and substantial way. But if this is what "Applied History" is to be, AY-YI-YI-YI-YI-YI-YI!!!! **Niall Ferguson**: [Fetch the purple toga: Emperor Trump is here](https://www.thetimes.co.uk/article/fetch-the-purple-toga-emperor-trump-is-here-f0rcbd20m): "Think of Harvey Weinstein, the predator whose behaviour was for years an 'open secret' among precisely the Hollywood types who were so shrill last year in their condemnation of Donald Trump for his boasts about 'grabbing' women by the genitals... >...“Women should never be talked about in that way,” declared the actor Ben Affleck a year ago, after the release of Trump’s “locker room” exchange with Access Hollywood host Billy Bush in 2005. However, Affleck became “angry and saddened” about his mentor Weinstein’s record of assaulting and harassing women only after it was splashed all over The New Yorker. This...J. Bradford DeLong

I confess that I am a great fan of Applied History. Theoretical arguments and conceptual frameworks are, ultimately, nothing but distilled, crystalized, and chemically cooked history. After all, what else could they possibly be? And it is very important to know whether the distillation, crystallization, and chemical cooking processes that underpin the theory and made the conceptual frameworks were honest ones. And that can be done only by getting good historians into the mix—in a prominent and substantial way.

But if this is what "Applied History" is to be, AY-YI-YI-YI-YI-YI-YI!!!!

Niall Ferguson: Fetch the purple toga: Emperor Trump is here: "Think of Harvey Weinstein, the predator whose behaviour was for years an 'open secret' among precisely the Hollywood types who were so shrill last year in their condemnation of Donald Trump for his boasts about 'grabbing' women by the genitals...

...“Women should never be talked about in that way,” declared the actor Ben Affleck a year ago, after the release of Trump’s “locker room” exchange with Access Hollywood host Billy Bush in 2005. However, Affleck became “angry and saddened” about his mentor Weinstein’s record of assaulting and harassing women only after it was splashed all over The New Yorker. This was too much for Rose McGowan, apparently one of Weinstein’s many victims, who told Affleck to “f--- off”—whereupon other actresses claimed Affleck himself had groped them.

In my experience few things enrage ordinary Americans more than the hypocrisy of the liberal elites.... At least Trump does not pretend to be a feminist. Weinstein raised hundreds of thousands of dollars for Hillary Clinton’s campaign. In January he joined the anti-Trump Women’s March in Park City, Utah. In May he sat next to Clinton at a fundraiser for Planned Parenthood, America’s biggest provider of birth control products and procedures, including abortion....

The brilliant Tom Holland... his book Rubicon: _The Triumph and Tragedy of the Roman Republic, “censoriousness was the mirror image of a drooling appetite for lurid fantasy.” Yes, that does sound familiar.... [In] Holland['s] telling, the [Roman] Republic dies too imperceptibly to be mourned. Superficially its decline was the result of recurrent civil war. But the underlying causes were the self-indulgence and social isolation of the Roman elite, the alienation of the plebeian masses, the political ascendancy of the generals and the opportunities all these trends created for demagogues. Reading Holland’s description of the libidinous orgies and extravagant cuisine of Baiae, the fabled Roman resort on the Gulf of Naples, it is impossible not to be reminded of present-day La La Land....

Congress was meant to be the dominant branch of government.... Progressives pressed for reform of what Woodrow Wilson disparagingly called “congressional government”. The 1900s saw the first presidential programmes—the Square Deal, the New Deal, the Fair Deal—sold to the public through newspapers and later radio and television. The 1960s brought presidential primaries and caucuses. With the advent of the internet the system took a further step down the road to direct plebiscitary presidential rule. The result was President Trump, king of the Twitter trolls....

Imperceptibly, the foundations of the republic have corroded. In Rome no one quite noticed that Octavian—or Augustus as he was renamed in 27BC—was becoming an emperor, for the outward forms of republican governance endured. Yet the symptoms of corrosion were all around, not least in the decadence of the Roman elite. I have never been persuaded by those who fear an American fascism in the style of Sinclair Lewis’s It Can’t Happen Here. None of the protagonists in today’s American drama would look well in a brown shirt, jackboots and tight breeches. But togas? I can’t imagine a garment better suited to Weinstein and the president-emperor he both reviles and resembles.

Back up. Even Ferguson admits that for the Roman Republic "its decline was the result of recurrent civil war". However this, he says, is only "superficially" the case. So let's look at the Roman Civil Wars.

According to Plutarch—who is appallingly close to being our only source for this stuff—they began in 133 BC when:

Blossius of Cumae... said it would be a shame and a great disgrace if [the Tribune] Tiberius [Sempronius Gracchus], a son of Gracchus, a grandson of [P. Cornelius] Scipio Africanus, and a champion of the Roman people, for fear of a raven should refuse to obey the summons of his fellow citizens; such shameful conduct, moreover, would not be made a mere matter of ridicule by his enemies.... Many of his friends on the Capitol came running to Tiberius with urgent appeals to hasten thither, since matters there were going well.... As soon as he came into view the crowd raised a friendly shout, and as he came up the hill they gave him a cordial welcome and ranged themselves about him, that no stranger might approach.

But after Mucius began once more to summon the [Assembly of the] Tribes to the vote, none of the customary forms could be observed because of the disturbance that arose on the outskirt of the throng, where there was crowding back and forth between the friends of Tiberius and their opponents.... Fulvius Flaccus, a senator... told him that at a session of the senate the party of the rich, since they could not prevail upon the consul to do so, were purposing to kill Tiberius themselves, and for this purpose had under arms a multitude of their friends and slaves. Tiberius, accordingly, reported this to those who stood about him, and they at once girded up their togas, and breaking in pieces the spear-shafts with which the officers keep back the crowd, distributed the fragments among themselves, that they might defend themselves against their assailants. Those who were farther off, however, wondered at what was going on and asked what it meant. Whereupon Tiberius put his hand to his head, making this visible sign that his life was in danger, since the questioners could not hear his voice.

But his opponents, on seeing this, ran to the senate and told that body that Tiberius was asking for a crown; and that his putting his hand to his head was a sign having that meaning. All the senators, of course, were greatly disturbed, and [Publius Cornelius Scipio] Nasica demanded that the consul should come to the rescue of the state and put down the tyrant. The consul replied with mildness that he would resort to no violence and would put no citizen to death without a trial; if, however, the people, under persuasion or compulsion from Tiberius, should vote anything that was unlawful, he would not regard this vote as binding.

Thereupon Nasica sprang to his feet and said: "Since, then, the chief magistrate betrays the state, do ye who wish to succour the laws follow me." With these words he covered his head with the skirt of his toga and set out for the Capitol. All the senators who followed him wrapped their togas about their left arms and pushed aside those who stood in their path, no man opposing them, in view of their dignity, but all taking to flight and trampling upon one another.... The attendants of the senators carried clubs and staves which they had brought from home; but the senators themselves seized the fragments and legs of the benches that were shattered by the crowd in its flight, and went up against Tiberius, at the same time smiting those who were drawn up to protect him.

Of these there was a rout and a slaughter, and as Tiberius himself turned to fly, someone laid hold of his garments. So he let his toga go and fled in his tunic. But he stumbled and fell to the ground among some bodies that lay in front of him. As he strove to rise to his feet, he received his first blow, as everybody admits, from Publius Satyreius, one of his [Tribunal] colleagues, who smote him on the head with the leg of a bench; to the second blow claim was made by Lucius Rufus, who plumed himself upon it as upon some noble deed. And of the rest more than three hundred were slain by blows from sticks and stones, but not one by the sword.

This is said to have been the first sedition at Rome, since the abolition of royal power, to end in bloodshed and the death of citizens; the rest though neither trifling nor raised for trifling objects, were settled by mutual concessions, the nobles yielding from fear of the multitude, and the people out of respect for the senate. And it was thought that even on this occasion Tiberius would have given way without difficulty had persuasion been brought to bear upon him, and would have yielded still more easily if his assailants had not resorted to wounds and bloodshed; for his adherents numbered not more than three thousand.

But the combination against him would seem to have arisen from the hatred and anger of the rich rather than from the pretexts which they alleged; and there is strong proof of this in their lawless and savage treatment of his dead body...

A decade later, in 121 B.C., the consul Lucius Opimius would seize upon the murder of his attendant Quintus Antyllius by partisans of Tiberius's brother Gaius Tiberius Gracchus as a pretext for the Senate's passage of the Senatus Consultum Ultimum—"consules darent operam ne quid detrimenti res publica caperet" ("let the consuls see to it that the Republic suffer no harm") and then murder Gaius. Afterwards politicians who thought Rome should do more to subdivide public land engrossed by rich senators either thought better of proposing agrarian reform laws or recognized that they needed an army. And it turned out that they could raise armies that would be loyal to them rather than the constitution of the Republic. And so we have those twenty who raised and commanded armies loyal to themselves sometimes within but often outside the Republic's legal framework:

All of these commanded armies loyal to themselves and not to the Senate (or to whatever rump of the Senate was sitting in Rome and issuing Senatus Consulta). None of these were both (a) victorious and (b) willing after victory to do what was necessary to make future armies loyal to the Senate rather than to their commanders in the future (although Sulla did try).

Thus it is no accident that the style of post-Republican rulers became Imperator—victorious commander—rather than king or dictator or something else.

Plutarch saw it as a chain of norm-breaking.

And I think he was right.

First, Scipio Nasica's faction broke the norm that the prosperity from conquest was to be widely shared, not least through ample and lavish land distribution and colonization. Second, Scipio Nasica's and then Opimium's Optimates broke the norm that Roman magistrates not be murdered in the streets. Third, Gaius Marius broke the norm that soldiers be recruited only from those whose household and kin had something of property to lose. Fourth, Gaius Marius broke the norm that magistracies be short-term and temporary. Fifth, Sulla broke the norm that commanders obeyed the Senate and people rather than marching on Rome to cow them with their soldiers. Sixth, Pompey broke the norm that commanders disband their armies after campaigns rather than hold them in reserve, even if demobilized. Sixth, Bibulus broke the norm that magistrates not filibuster—not declare that every day was inauspicious for public legislation. Seventh, Caesar broke the norm that magistrates respect the vetoes of their colleagues. Eighth, Pompey broke the norm that Roman politicians respect their peers as equals. Ninth, Caesar broke the norm that Roman politicians respect their superiors and the Senate, and crossed the Rubicon.

Why were these norm-breakings successful? Why did they proceed? Plutarch says it was out of the "hatred and anger of the rich" that led them to react to discontent at the distribution of land and spoils in a new way. Before, he said, there had always been compromise and adjustment and incremental change, "the nobles yielding from the fear of the multitude, and the people out of respect for the senate..." But Publius Cornelius Scipio Nasica's generation changed that, both in their unwillingness to share the profits of imperial conquest and in their willingness to kill opposing political leaders.

Why did the ball keep rolling? Because increased maldistribution opened up further opportunities for norm-breaking. Male Roman citizens from 450 B.C. to 150 B.C. joined the legions, and got victory, loot, land, and honor at the hands of the Senate. It was a profitable and respected thing to do with your life. Afterwards, starting with the political ascendancy of Publius Cornelius Scipio Nasica and his faction, while service in the legions would still get you victory and booty, it would not get the distribution of land to farm to you and your kinfolk—not unless your general kept his hands firmly on the reins of power, and for that to happen you needed to be willing to come back to the standards and fight against your fellow citizens, if necessary.

Theoretical approaches and conceptual frameworks to be derived from this historical episode? Many and important. Applications to today? No direct applications, but a lot of thoughtful ideas and questions raised, for history does rhyme.

But this questions, ideas, approaches, frameworks, and possible applications are not those that Niall Ferguson wants to draw. His version of "history" is not wie es eigentlich gewesen in the least.

At a rhetorical level, Fergusons' piece is something that will be, as Jacob T. Levy likes to say, an interesting piece for far-future historians at Radioactive Liebowitz Morlock University to decode. The villains are Harvey Weinstein, Donald Trump—sorta, because at least he is not a hypocrite pretending to be a feminist, and hypocrisy is the big sin of the "Hollywood types who were so shrill last year in their condemnation of Donald Trump for his boasts about 'grabbing' women by the genitals"—Ben Affleck, Hilary Rodham Clinton, hypocritical "liberal elites", the celebrities of Los Angeles, Woodrow Wilson, Theodore Roosevelt, Franklin Delano Roosevelt, Harry S. Truman, and the Internet.

This is a strange list of villains indeed.

And on an application level—Ferguson's reading of Holland's history of Rome sees the causes of the possible imminent fall of the American Republic and America as: "the self-indulgence and social isolation of the Roman elite, the alienation of the plebeian masses, the political ascendancy of the generals and the opportunities all these trends created for demagogues... the libidinous orgies and extravagant cuisine of Baiae, the fabled Roman resort... [that] remind[s me of] La La Land..."

Is this well-founded in the Roman experience? No. Ten thousand times, no. NO!!

Were the military-political powerful ones of the late Roman Republic able to raise and command armies loyal to themselves because of Ferguson's list of causes? Let's run through it:

"the self-indulgence... of the Roman elite..."? Nope. An addiction to "Eastern", "Greek", or "Egyptian" vices was a propaganda accusation that members hurled against each other: self-control was a principal Roman virtue, and to be ridden by your vices and your addictions showed that you were unfit to hold imperium. But Gaius Julius Caesar's being "every woman's husband and very man's wife" did not seem to harm the loyalty of his soldiers or his political and military skill.

"the libidinous orgies and extravagant cuisine of Baiae..."? Nope. See above.

"the... social isolation of the Roman elite..."? Nope. Roman society was patterned in a strong patron-client network. You could not be socially isolated and remain part of the elite. And the fact that all elite factions had powerful social-network hooks into a population with lots of soldiers and ex-soldiers in it was what made the civil wars possible.

"the opportunities... created for demagogues..."? Which demagogues? Gang leaders Titus Annius Milo and Publius Clodius Pulcher? But they were much more tools of broader political factions engaged in norm-breaking than independent actors. Lucius Appuleius Saturninus, Publius Sulpicius Rufus, Tiberius Sempronius Gracchus, and Gaius Sempronius Gracchus? They had no armies. And so they were killed. So nope.

"the political ascendancy of the generals...". Well, this is not a cause but an effect. This is the thing to be explained. This is the series of civil wars that Ferguson dismisses as "superficial", right? But it is the key question: Why would Rome's citizens in the fourth, third, and second centuries B.C. fight for and be loyal to the Senate and the consuls, while in the first century B.C. they fought for and were loyal to their generals?

"the alienation of the plebeian masses..." Here we are indeed getting somewhere. But why were the plebeian masses alienated? Could it be that they thought they deserved... a fair share of imperial prosperity? A Square Deal, a New Deal, a Fair Deal? And did not the hubris of elites in seeking to engross the spoils of empire and stymie all reform call forth nemesis? That would be a better form of Applied History, I think, but it would not focus on hypocritical liberal elites, LA celebrity parties, Hillary Rodham Clinton, and Theodore Roosevelt. It would focus on income and wealth inequality, and on those so eager to defend it.

Certainly Plutarch thought it was "the hatred and anger of the rich" which broke the probability of compromise "the nobles yielding from fear of the multitude, and the people out of respect for the senate" that started the ball rolling. And he was, if not there, our historian first responder able to talk to many and read much that is lost to us. Listen to him!

Applied History: "For some time, the majority of academic historians have tended to shy away from questions of contemporary interest, especially to policy-makers...

...but also of interest to students interested in policy issues. Previous generations were less shy of such questions. Writing in 1939, the great Oxford philosopher of historian R. G. Collingwood made the case for applied history succinctly. “True historical problems arise out of practical problems,” he argued. “We study history in order to see more clearly into the situation in which we are called upon to act. Hence the plane on which, ultimately, all problems arise is the plane of ‘real’ life: that to which they are referred for their solution is history.”

If historians decline to address current issues, then those making policy will be denied the benefit of historical perspective. Writing in the Atlantic in 2016, Graham Allison and Niall Ferguson made the case for establishing a White House council of historical advisers, analogous to the council of economic advisers. Their argument was that decision-making in Washington (and not only there) would be improved by a more systematic effort to take the lessons of history into account.

In the hope that other historians share the view that there is more to be learned from history than merely “how to make new mistakes” (in A.J.P. Taylor’s phrase), we are holding what we hope will be a series of conferences devoted to applied history. What sort of questions will the conference address? The following are the ones to be addressed by speakers and commentators:

What lessons can a modern democracy learn from the fall of Roman Republic?

Are recent developments in American politics unprecedented, or is Trump merely populism revisited?

Is deep economic or political reform possible in the People's Republic of China?

Did the United States learn the right lessons from defeat in Vietnam?

How far are major historical discontinuities explicable in terms of climatic change?

Are cryptocurrencies likely to replace fiat currencies in the foreseeable future?

How much of a Potemkin superpower is Putin’s Russia?

What can we learn from past attempts to learn from the past?

Can we learn anything of the Cold War that is relevant to the world in 2018?

How might 20th-century globalization unfold?

Does rising inequality matter?

What does history suggest will come of the recent upsurge in Islamist-inspired violence?

How can a country fight an ideology?

In each case, the paper’s author will seek to answer the question with the help of historical evidence, and in particular the use of analogies and comparisons. The conference is a joint venture between the Hoover Institution, the Axel and Margaret Ax:son Johnson Foundation, and the Belfer Center at Harvard’s Kennedy School. The conference papers will subsequently be published in a book with the title Applied History.

Organizers

Hoover Institution, Stanford University: With its eminent scholars and world-renowned Library and Archives, the Hoover Institution seeks to improve the human condition by advancing ideas that promote economic opportunity and prosperity, while securing and safeguarding peace for America and all mankind.

The Belfer Center for Science and International Affairs, Harvard Kennedy School: The Belfer Center for Science and International Affairs is the hub of Harvard Kennedy School's research, teaching, and training in international security and diplomacy, environmental and resource issues, and science and technology policy. In 2017, for the fourth year in a row, the Belfer Center was ranked the world's #1 University Affiliated Think Tank by University of Pennsylvania's Think Tanks and Civil Societies Program.

Axel and Margaret Ax:son Johnson Foundation: The Axel and Margaret Ax:son Johnson Foundation is a private foundation whose principal objective is to facilitate scientific research in general. The foundation has in particular chosen to benefit the liberal arts and the social sciences. It was founded in 1947 by the late Consul General Axel Ax:son Johnson (1876-1958) together with his wife Margaret, owner of the Nordstjernan group.

2:15 – 3:00 PM Session 12: Defeating an Idea: What the Cold War Can Teach Us About How States Fight Ideologies
Presenter: Jeremy Friedman
Commentator: John Bew
Chair: Philip Zelikow

Ana Lucia Araujo: ALL-MALE HISTORY CONFERENCE: "ALL-MALE HISTORY CONFERENCE. This goes for the GUINNESS BOOK of the century! A team of 30 white male historians will discuss Applied History at @Stanford. What a shame..."

tag:typepad.com,2003:post-6a00e551f08003883401bb09fbfabd970d2018-03-16T09:35:52-07:002018-03-16T09:35:52-07:00**Should-Read**: **Jonathan Chait**: [New Trump Economist Kudlow Has Been Wrong About Everything](http://nymag.com/daily/intelligencer/2018/03/new-trump-economist-kudlow-has-been-wrong-about-everything.html): "The Republican Party... supply-side economics... not merely a generalized preference for small government with low taxes... >...but a commitment to the cause of low taxes, particularly for high earners, that borders on theological. In the time that has passed since then, that grip has not weakened.... The appointment of Lawrence Kudlow as head of the National Economic Council indicates how firmly supply-siders control Republican economic policy, and how little impact years of failed analysis have had.... They likewise believe tax cuts are the necessary tonic for every economic circumstance. The purest supply-siders, like Kudlow, go further and deeper in their commitment. Kudlow attributes every positive economic indicator to lower taxes, and every piece of negative news to higher taxes. While that sounds absurd, it is the consistent theme he has maintained throughout his career as a prognosticator. It’s not even a complex form of kookery, if you recognize the pattern. It’s a very simple and blunt kind of kookery...J. Bradford DeLong

...but a commitment to the cause of low taxes, particularly for high earners, that borders on theological. In the time that has passed since then, that grip has not weakened.... The appointment of Lawrence Kudlow as head of the National Economic Council indicates how firmly supply-siders control Republican economic policy, and how little impact years of failed analysis have had.... They likewise believe tax cuts are the necessary tonic for every economic circumstance. The purest supply-siders, like Kudlow, go further and deeper in their commitment. Kudlow attributes every positive economic indicator to lower taxes, and every piece of negative news to higher taxes. While that sounds absurd, it is the consistent theme he has maintained throughout his career as a prognosticator. It’s not even a complex form of kookery, if you recognize the pattern. It’s a very simple and blunt kind of kookery...

The Question of Larry Kudlow...tag:typepad.com,2003:post-6a00e551f08003883401bb09fbf9c6970d2018-03-16T09:17:37-07:002018-03-16T09:17:37-07:00There has long been discussion of whether Larry Kudlow believes what he says. (1) Is he one of the professional Republican commentators like Stephen Moore, James Glassman, and Kevin Hassett who knows that what he says is wrong, but says it because it is just a game—that feeding one's readers and viewers something that is not bullshit is simply not a goal, and telling the truth will serve when it does not conflict with one's goals? Or (2) is he just not aware of the world outside him, in the sense in which people are usually oriented toward reality? Well, why not both? Being unaware both that FICA is not a household-level but an earner-level tax and of the approximate size of the federal workforce when there is no upside to the falsehood seems to me conclusive evidence that there is a good deal of (2) going on. And maybe that gives him the freedom to be a more effective version of (1) than people who are more often clued in to how what they are saying is simply not true. I do see a sharp contrast between the Kudlow of the 1980s and the Kudlow I have run across...J. Bradford DeLong

There has long been discussion of whether Larry Kudlow believes what he says. (1) Is he one of the professional Republican commentators like Stephen Moore, James Glassman, and Kevin Hassett who knows that what he says is wrong, but says it because it is just a game—that feeding one's readers and viewers something that is not bullshit is simply not a goal, and telling the truth will serve when it does not conflict with one's goals? Or (2) is he just not aware of the world outside him, in the sense in which people are usually oriented toward reality?

Well, why not both? Being unaware both that FICA is not a household-level but an earner-level tax and of the approximate size of the federal workforce when there is no upside to the falsehood seems to me conclusive evidence that there is a good deal of (2) going on. And maybe that gives him the freedom to be a more effective version of (1) than people who are more often clued in to how what they are saying is simply not true.

I do see a sharp contrast between the Kudlow of the 1980s and the Kudlow I have run across since, say, 1992: the later Kudlow seems to know much less, and to have a much more difficult time figuring out that he needs to alter his range and rhythm whenever he is speaking to an audience that is neither Fox News viewers nor right-wing investors who are easy prey to affinity fraud...

...but a commitment to the cause of low taxes, particularly for high earners, that borders on theological. In the time that has passed since then, that grip has not weakened.... The appointment of Lawrence Kudlow as head of the National Economic Council indicates how firmly supply-siders control Republican economic policy, and how little impact years of failed analysis have had.... They likewise believe tax cuts are the necessary tonic for every economic circumstance. The purest supply-siders, like Kudlow, go further and deeper in their commitment. Kudlow attributes every positive economic indicator to lower taxes, and every piece of negative news to higher taxes. While that sounds absurd, it is the consistent theme he has maintained throughout his career as a prognosticator. It’s not even a complex form of kookery, if you recognize the pattern. It’s a very simple and blunt kind of kookery.

In 1993, when Bill Clinton proposed an increase in the top tax rate from 31 percent to 39.6 percent, Kudlow wrote:

There is no question that President Clinton’s across-the-board tax increases… will throw a wet blanket over the recovery and depress the economy’s long-run potential to grow...

This was wrong. Instead, a boom ensued. Rather than question his analysis, Kudlow switched to crediting the results to the great tax-cutter, Ronald Reagan:

The politician most responsible for laying the groundwork for this prosperous era is not Bill Clinton, but Ronald Reagan...

he argued in February, 2000. By December 2000, the expansion had begun to slow. What had happened? According to Kudlow, it meant Reagan’s tax-cutting genius was no longer responsible for the economy’s performance:

The Clinton policies of rising tax burdens, high interest rates and re-regulation is responsible for the sinking stock market and the slumping economy...

he mourned, though no taxes or re-regulation had taken place since he had credited Reagan for the boom earlier that same year. By the time George W. Bush took office, Kudlow was plumping for his tax-cut plan. Kudlow not only endorsed Bush’s argument that the budget surplus he inherited from Clinton—the one Kudlow and his allies had insisted in 1993 could never happen, because the tax hikes would strangle the economy—would turn out to be even larger than forecast:

Faster economic growth and more profitable productivity returns will generate higher tax revenues at the new lower tax-rate levels. Future budget surpluses will rise, not fall...

This was wrong, too.... Kudlow then began to relentlessly tout Bush’s economic program.... insist that the housing bubble that was forming was a hallucination.... He made this case over and over (“There’s no recession coming. The pessimistas were wrong. It’s not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). Goldilocks is alive and well. (The Bush boom is alive and well.”) and over (“The Media Are Missing the Housing Bottom,” he wrote in July 2008). All of this was wrong. It was historically, massively wrong.

When Obama took office, Kudlow was detecting an “inflationary bubble.” That was wrong. He warned in 2009 that the administration “is waging war on investors. He’s waging war against businesses. He’s waging war against bondholders. These are very bad things.” That was also wrong, and when the recovery proceeded, by 2011, he credited the Bush tax cuts for the recovery. (Kudlow, April 2011: “March unemployment rate drop proof lower taxes work.”) By 2012, Kudlow found new grounds to test out his theories: Kansas, where he advised Republican governor Sam Brownback to implement a sweeping tax-cut plan that would produce faster growth. This was wrong. Alas, Brownback’s program has proven a comprehensive failure, falling short of all its promises and leaving the state in fiscal turmoil...

...Nonetheless I can't help but wonder if he might feel a faint touch of a related emotion when he considers this 2005 offering, "The Housing Bears Are Wrong Again":

Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.

None of this has happened. The Federal Reserve has effectively mopped up excess cash and calmed inflation expectations. That’s why bond rates are hovering around 4 percent, with most mortgage rates about a point higher.

Meanwhile, the homebuilders index has increased 76 percent over the past year, with particularly well-run companies like Toll Brothers up about twice as much. The bubbleheads missed all this because they haven’t done their homework. If they had put a little elbow grease into their analysis, they would have learned that new-housing starts for private homes and apartments haven’t changed much during the past three and a half decades....

Since 1997 home prices have been increasing at a 6.5 percent pace on a yearly basis, with a 12 percent gain over the past year. In contrast, stock prices have gained only 3 percent yearly during the same period. Simply, real estate has had the tax-advantage over stocks as an investment vehicle. There is no $500,000 per family tax-free capital gain for shares, nor are the borrowing costs for the purchase of stocks tax-deductible....

Which leads to a final thought: Why not apply the same tax laws that have benefited home owners to stock market investors and home buyers? If this were to come about, even more wealth would be created in America, leading to even more new business and job creation.

Tax reform to create a level playing field could boost our economy’s potential to grow beyond almost anyone’s wildest dreams. Homeownership, stock ownership, and small business ownership should be taxed at the same minimal rates as they are all key components of economic growth and wealth creation.

Uncapping the payroll tax reveals still another cultural misstep by Sen. Obama. He apparently has a difficult time understanding that nowadays, a veteran fireman or a veteran cop, married to a veteran schoolteacher, will make well over 100,000. In fact, they can make close to
200,000. Yet Obama still wants to go ahead and tax both the first and last payroll dollar of this group at a very high marginal tax rate by uncapping the Social Security (FICA) tax.

The FICA cap is an individual cap, unaffected by income earned/payroll taxes paid by your spouse.

...I appeared on Larry Kudlow’s show last night and we had a bit of a tussle about how much deficit reduction could be achieved by cutting federal salaries. Larry argued that a 5-10% pay cut for federal civilian employees like that imposed by Ireland could have a major impact on the federal budget deficit. (Larry was greatly influenced by this WSJ oped.) I had come prepared to talk about a different subject, and so didn’t have the relevant figures at hand, but I suggested that his math sounded incredible. Looking it up this morning, it IS incredible.... Even if we fired every single federal civil servant and shuttered the entire non-defense federal government, three-fourths of the budget deficit would still be with us. Does this really come as news to Larry Kudlow, a very smart man and a former deputy to David Stockman at the Office of Management and Budget?

...but I find him good-humored and courteous, and it’s always worth talking to people who aren’t already convinced of your point of view. And, to his credit, he makes it a point to have a lot of people who don’t agree with him on his show.

What I don’t understand is how, given all his exposure to sincere people who think differently than he does, Kudlow’s mental model for disagreement ends up being so ideologically skewed. I was on last night to talk about the Obama administration’s resistance to a tax holiday for the profits American corporations are holding overseas.... Michael Mundaca... [argues] our previous experiment with a corporate tax holiday didn’t pan out.... You can disagree with Mundaca’s take, but you don’t need to ask Dr. Strange to summon a demon in order to interpret it. Bloomberg Business Week — not exactly a publication known for its aggressively anti-business leanings—ran a cover story this week making almost exactly the same argument. In that cover story, a dozen respected tax economists provided support for the position. But that’s not how Kudlow saw it. “I believe they want to punish international business,” he said. A few minutes later: “I’m suspecting that Team Obama just doesn’t want to help the foreign earnings of companies.” And then: “I think they do have an ideological bias against business.”...

[Y]ou see this a lot. Somehow, people find it preferable to think the president of the United States a socialist, Marxist or Kenyan anti-colonialist than a guy who agrees with Mitt Romney’s 2005 health-care opinions rather than Mitt Romney’s 2011 health-care opinions. I won’t even get into Glenn Beck’s take on the administration’s motivations, as even on the Internet, I don’t have the space. But you end up with these winding, esoteric theories to explain perfectly common policy preferences and political decisions. It’s really weird.

(2011): Inside the Mind of Larry Kudlow...: "
One oldtime Washington hand who has spent a lot of time working with James "Dow 36000" Glassman claims that for Glassman it is simply a game: Glassman thinks his job is not to say what he thinks is true but rather what the audience he is cultivating wants to hear from him. The two times I have been on the same stage as Kudlow have made me think that the same is true of Kudlow: he is too smart to have meant some of the things he said, or to have actually thought that the other people on the panel had said what Kudlow claimed they had said.

...as estimated by the National Income and Product Accounts and statistical estimates of the change in total measured household net worth:

There is a gap between the rate of return on the average investment made in a year and the cost of capital, which means that 1 dollar of savings on average produces more than 1 of value.

The NIPA may well understate corporate savings and investment by counting a bunch of investments in organizational form as corporate operating expenses.

All of us free-ride on technological research and development, reaping where we do not sow, gathering where we do not scatter, and profiting where we do not save and invest.

Shifts in the distribution of income away from labor and toward capital increase measured household net worth—which includes the increased expected future profits from capital—but not true household net worth—which also includes the decreased expected future wages of labor.

Declines in interest rates make the future more valuable relative to the present and so raise measured household net worth today—which is measured in today's dollars—without any outward shift in the true consumption-possibilities frontier.

Government deficits that raise the debt lower national savings but not measured household net worth.

Good news about the future produces windfall gains and bad news windfall losses which alter this year's household net worth without telling us much about over-all long-run accumulation trends.

I was sitting on the right end of an nine-person panel at the New School... http://www.cepa.newschool.edu/events/events_schwartz-lecture.htm#. Bob Solow was sitting on the left end—Solow, Shapiro, Schwartz, Rohatyn, Kudlow, Kerrey, Kosterlitz, Hormats, DeLong. Bob Solow expressed concern and worry over the declines in the U.S. savings rate over the past generation. Larry Kudlow, in the middle of the panel, aggressively launched into a rant—about how the NIPA savings rate was wrong, about how the right savings rate was the change in household net worth, about how there was no potential problem with America saving too little, that the economy was strong, and that that day's employment report had been wonderful, and that Paul Krugman had predicted nine out of the last zero recessions, et cetera, et cetera, et cetera.

What is one to do? You watch a guy—Bob Solow—one of the smartest and most thoughtful people I know, having his intellectual impact neutralized by a guy—Kudlow—who really isn't in the intellectual inquiry business anymore. Kudlow clearly has not thought through the biases and gaps in the household net worth number: if he had, there is no way he could say what he is saying.

On paper, in print, on the screen, one can point out that the employment report was anemic—it was not a bloodletting by any means, but it was a bit disappointing.

On paper, in print, on the screen, one can say that there is reason to worry about the decline in housing demand and the possibility that it might trigger a recession.

On paper, in print, on the screen one can say that reasons (4), (5), and (6) pushing up measured household net worth are reasons to discount that statistic as misleading because they do not reflect any true increase in appropriately-defined wealth, that any increase in household net worth caused by (7) is a transitory phenomenon that tells us little about permanent saving and accumulation patterns, that (1) and (2) affect the level but not the trends of saving, and do not speak to Solow's worry about the savings-investment rate's decline, and thus that only reason (3)—the effects of the now decade-long computer-and-communications real investment boom on our total wealth—provides a reason to even begin to think about whether Bob Solow's worries about declining savings as measured by the NIPA are at all overblown.

But there are ninety minutes for a panel with nine people on it. To the audience it looks like two cocksure economists who disagree for incomprehensible reasons. And my ten minute share will come too late to try to referee Solow-Kudlow in any fair, balanced, and effective way.

It's an anti-discourse situation: Kudlow doesn't acknowledge—may not know—the flaws in his chosen statistic. And I can't help wonder what Kudlow would be saying if a Democrat were president.

It's an intellectual Gresham's Law in action...

What can I do? I can blog about it.

tag:typepad.com,2003:post-6a00e551f08003883401b7c95857a8970b2018-03-14T16:42:23-07:002018-03-14T16:42:23-07:00**Note to Self**: Lars Peter Hansen: “What rational expectations as a modeling strategy did was it took off the table policies based on systematically fooling people. That is a positive achievement...”J. Bradford DeLong

Note to Self: Lars Peter Hansen: “What rational expectations as a modeling strategy did was it took off the table policies based on systematically fooling people. That is a positive achievement...”

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e1c9ec970c2018-03-14T13:58:47-07:002018-03-14T14:02:07-07:00**Should-Read**: Lousy title. Good op-ed: **Belle Sawhill**: [Inflation? Bring It On. Workers Could Actually Benefit](https://www.nytimes.com/2018/03/09/opinion/inflation-unemployment-rate.html): "Even if inflation does creep up above 2 percent, we shouldn’t be too worried... >...Having operated below it for many years, the economy may not be harmed if it runs for a few years above that target.... We are in the midst of a big fiscal and monetary experiment. And as with any experiment, the consequences are unknown. What we do know is that the costs of the Great Recession were enormous—at least $4 trillion in lost income.... The biggest losses were experienced by those in the bottom and middle portions of the income distribution who lost jobs and saw much of the equity in their homes destroyed. They are the ones who stand to gain the most if unemployment continues to fall and wages keep rising. Businesses, desperate for workers, reach deeper into the ranks of those who are still jobless, do more training to get those workers up to speed, and pay higher wages as they compete to hire or retain their work force. Discouraged workers — the millions who’ve left the labor force — might actually re-enter it, and workers could find...J. Bradford DeLong

...Having operated below it for many years, the economy may not be harmed if it runs for a few years above that target.... We are in the midst of a big fiscal and monetary experiment. And as with any experiment, the consequences are unknown. What we do know is that the costs of the Great Recession were enormous—at least $4 trillion in lost income.... The biggest losses were experienced by those in the bottom and middle portions of the income distribution who lost jobs and saw much of the equity in their homes destroyed. They are the ones who stand to gain the most if unemployment continues to fall and wages keep rising. Businesses, desperate for workers, reach deeper into the ranks of those who are still jobless, do more training to get those workers up to speed, and pay higher wages as they compete to hire or retain their work force. Discouraged workers — the millions who’ve left the labor force — might actually re-enter it, and workers could find their shrinking share of national income rise again. Besides, economists are not sure when super-low unemployment will set off inflation.... A stronger economy might help the left behind as much as, if not more than, any of these specific measures. The old models don’t seem to be working, and the downside risks of this experiment are limited. Let’s run a truly high-pressure economy and see what happens...

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e2827a970c2018-03-14T13:38:22-07:002018-03-14T13:38:22-07:00**Should-Read**: **Ed Kilgore**: [What the Christian Right Sowed, Trump Reaped](http://nymag.com/daily/intelligencer/2018/03/what-the-christian-right-sowed-trump-reaped.html): "Gerson is especially insightful [in saying]: Conservative Evangelicals didn’t back Trump despite his unsavory personality... >...but in some respects because of it: >>Trump consistently depicts evangelicals as they depict themselves: a mistreated minority, in need of a defender who plays by worldly rules. Christianity is “under siege,” Trump told a Liberty University audience. “Relish the opportunity to be an outsider,” he added at a later date: “Embrace the label.” Protecting Christianity, Trump essentially argues, is a job for a bully. >That is an intuitively more convincing explanation of the affection that the Christian right has for Trump than the idea that he’s a god-chosen infidel like Cyrus the Great, or a sort of Evangelical-by-osmosis.... But like Russell Moore’s accusation that the conservative Evangelical “marriage” to the GOP and the Christian nationalism that is the marriage’s fruit are inherently wicked, Gerson is asking Christian-right leaders and followers to retrace too many steps for comfort. Besides, he’s tainted by his association with the onetime Evangelical darling George W. Bush and his globalist outlook...J. Bradford DeLong

Trump consistently depicts evangelicals as they depict themselves: a mistreated minority, in need of a defender who plays by worldly rules. Christianity is “under siege,” Trump told a Liberty University audience. “Relish the opportunity to be an outsider,” he added at a later date: “Embrace the label.” Protecting Christianity, Trump essentially argues, is a job for a bully.

That is an intuitively more convincing explanation of the affection that the Christian right has for Trump than the idea that he’s a god-chosen infidel like Cyrus the Great, or a sort of Evangelical-by-osmosis.... But like Russell Moore’s accusation that the conservative Evangelical “marriage” to the GOP and the Christian nationalism that is the marriage’s fruit are inherently wicked, Gerson is asking Christian-right leaders and followers to retrace too many steps for comfort. Besides, he’s tainted by his association with the onetime Evangelical darling George W. Bush and his globalist outlook...

tag:typepad.com,2003:post-6a00e551f08003883401b7c9584cd1970b2018-03-14T13:23:52-07:002018-03-14T13:23:52-07:00**Should-Read**: **Dean Baker**: [Doesn't Anyone Care If the Trump Tax Cuts Are Working?](http://cepr.net/blogs/beat-the-press/doesn-t-anyone-care-if-the-trump-tax-cuts-are-working): "Capital goods orders for January... >...a hugely important early measure of the success of the Trump tax cuts. The ostensible rationale for the big cut in the corporate tax rate that was at the center of the tax cut is that it will lead to a flood of new investment.... If lower rates really produce a flood of investment we should at least begin to see some sign in new orders once the tax cut was certain to pass. The January report showed orders actually fell modestly for the second consecutive month.... Remarkably, these new data have gotten almost no attention from the media... ---- **Dean Baker**: [Small Businesses Still Aren't Impressed by the Republican Tax Cut](http://cepr.net/blogs/beat-the-press/small-businesses-still-aren-t-impressed-by-the-republican-tax-cut): "The National Federation of Independent Businesses... 29 percent of businesses expect to make a capital expenditure in the next 3 to 6 months... >...somewhat higher than the 26 percent reported for February of 2017, but below the 32 percent reported for August of last year. It's also the same as the 29 percent reading reported back in August of 2014 when a Kenyan socialist was in the White House.... There...J. Bradford DeLong

...a hugely important early measure of the success of the Trump tax cuts. The ostensible rationale for the big cut in the corporate tax rate that was at the center of the tax cut is that it will lead to a flood of new investment.... If lower rates really produce a flood of investment we should at least begin to see some sign in new orders once the tax cut was certain to pass. The January report showed orders actually fell modestly for the second consecutive month.... Remarkably, these new data have gotten almost no attention from the media...

...somewhat higher than the 26 percent reported for February of 2017, but below the 32 percent reported for August of last year. It's also the same as the 29 percent reading reported back in August of 2014 when a Kenyan socialist was in the White House.... There is no evidence here of any uptick in investment whatsoever and certainly not of the explosive increase promised by the Trump administration. Maybe if Trump did some more tweeting on the issue it would help...

tag:typepad.com,2003:post-6a00e551f08003883401bb09faea14970d2018-03-14T12:58:50-07:002018-03-14T12:58:50-07:00**Should-Read**: **Dylan Matthews**: [Larry Summers on the Midwest and South: the case for a government bailout of the heartland](https://www.vox.com/2018/3/8/17093042/larry-summers-brookings-economic-heartland-midwest-west-virginia-subsidy): "In 2016, only 5 percent of men ages 25 to 54 in Alexandria, Virginia (a rich DC suburb), were not working... >...In Flint, Michigan, the share was 51 percent. That staggering fact frames a new paper by three Harvard economists—Benjamin Austin, Ed Glaeser, and former Treasury secretary/chief Obama economic adviser Larry Summers.... it’s notable that Glaeser and Summers are now embracing an active government role in revitalizing struggling parts of the country, and trying to work through the best way to do it. >While the idea that Youngstown, Ohio, needs more help than San Francisco might seem intuitive to a non-economist, the economic case for policies targeting certain areas, rather than certain kinds of individuals, is somewhat shakier.... Most variation in incomes is within regions, not between them.... Why implement policies to boost specific geographic areas when you could just direct money to poor individuals instead?... Austin, Glaeser, and Summers argue that place-based policies are necessary because different regions respond to various public policies differently.... The authors roughly estimate how responsive workers in different areas are to employment subsidies that boost...J. Bradford DeLong

...In Flint, Michigan, the share was 51 percent. That staggering fact frames a new paper by three Harvard economists—Benjamin Austin, Ed Glaeser, and former Treasury secretary/chief Obama economic adviser Larry Summers.... it’s notable that Glaeser and Summers are now embracing an active government role in revitalizing struggling parts of the country, and trying to work through the best way to do it.

While the idea that Youngstown, Ohio, needs more help than San Francisco might seem intuitive to a non-economist, the economic case for policies targeting certain areas, rather than certain kinds of individuals, is somewhat shakier.... Most variation in incomes is within regions, not between them.... Why implement policies to boost specific geographic areas when you could just direct money to poor individuals instead?... Austin, Glaeser, and Summers argue that place-based policies are necessary because different regions respond to various public policies differently.... The authors roughly estimate how responsive workers in different areas are to employment subsidies that boost their wages by estimating how employment changes in different areas as wages rise and fall. Sure enough, they find that West Virginians are more than three times as sensitive to changes in the rewards to work as Wyoming residents are. That is: Employment subsidies targeted at struggling states like West Virginia are likely to be considerably more effective than subsidies to better-off states like Wyoming...

tag:typepad.com,2003:post-6a00e551f08003883401bb09faec03970d2018-03-14T12:01:04-07:002018-03-14T12:01:06-07:00**Should-Read**: **Josh Barro and Isaac Chotiner**: [Policy without politics, immigration, and Trump’s self-awareness](https://slate.com/news-and-politics/2018/03/josh-barro-on-policy-without-politics-immigration-and-trumps-self-awareness.html): **Isaac Chotiner**: "Are you enjoying this moment? By 'this moment', I mean the last 14 to 15 months of being a political commentator?... >...**Josh Barro**: No, I’m not. I worked in public policy think tanks for a few years before I did [political commentary], and I wrote specifically on state and local government finance. So the reason I got into writing about politics was to be able to write about some of those issues, where I felt like I was able to explain things more clearly than people might otherwise hear them explained, help them understand relatively complicated areas of policy and what’s a good idea or a bad idea. And our politics are just not very much about policy right now.... The news that we’ve had on the tariffs over the last week or so, if the president actually goes through with this policy, will have important economic effects, but there’s been a lot of time spent on, frankly, bullshit.... I go crazy when people debate the ins and outs of what Trump said about DACA policy. It just seems irrelevant to understanding how Washington, over...J. Bradford DeLong

...Josh Barro: No, I’m not. I worked in public policy think tanks for a few years before I did [political commentary], and I wrote specifically on state and local government finance. So the reason I got into writing about politics was to be able to write about some of those issues, where I felt like I was able to explain things more clearly than people might otherwise hear them explained, help them understand relatively complicated areas of policy and what’s a good idea or a bad idea. And our politics are just not very much about policy right now.... The news that we’ve had on the tariffs over the last week or so, if the president actually goes through with this policy, will have important economic effects, but there’s been a lot of time spent on, frankly, bullshit.... I go crazy when people debate the ins and outs of what Trump said about DACA policy. It just seems irrelevant to understanding how Washington, over these last 14 months, is actually working....

Isaac Chotiner: If I’ve ever read anyone who I’ve considered kind of a centrist technocrat, it would be you, which I would assume you would view as somewhat of a badge of honor, to be referred to as that. Or not. What do you think?

Josh Barro: I think centrist technocracy has not had a great decade.... And we’re still reckoning with this. A lot of the big mistakes were in monetary policy, especially in Europe. The eurozone, which was absolutely seen as a technocratic project, has been a disaster, especially for Southern Europe, and it’s been fueling a lot of these populist movements....

Isaac Chotiner: Is there something inherent in centrist technocracy that you’re likely to have these kinds of problems? For example, in the case of immigration, I guess you could say that the reason that no one wanted to enforce these things was because the interests involved didn’t want them to. I guess what I’m wondering is: Does this change your larger analysis of whether centrist technocracy can work, rather than just think, “Oh, various bureaucrats made stupid choices or choices that were politically unfortunate”?

Josh Barro: Why did you not have robust immigration enforcement? It’s partly because interest groups on both sides didn’t really want it. Businesses wanted to have cheap labor available to them, both legally and then also illegally. Part of the advantage of illegal immigration is that they don’t have to pay people minimum wage. They don’t have to follow labor laws. And then on the left, you had various reasons for wanting higher levels of immigration. Often, the people who might immigrate are relatives and associates of people who are already here. It’s perfectly reasonable that they want those people to be able to immigrate. There are also political effects. Democrats benefit from demographic change in the country. So basically you had two sides of the issue that were not motivated to enforce, and those interest group voices, especially the business community, are overrepresented in Washington.... As for whether a centrist technocratic government is possible that works well, we’ve seen some countries that have avoided these problems. Canada and Australia are good examples.
Canada has managed their immigration system very well, and they have a large number of immigrants....

Isaac Chotiner: I think the one that’s more shocking to me than the snobbiness—and I agree, there was a certain snobbiness to some of that—is the cruelty, which I still can’t quite get over, has not registered more with people. He’s just not nice.

Josh Barro: The weird thing about this, though, is he’s been like that forever. And yet, in his contexts, in business and entertainment, he was able to be like this and then turn on a dime and act like your friend again, and people would go along with it. It’s like he’s clearly having fun, and it’s like people halfway feel like they’re in on the joke. So obviously, I don’t think Mexican immigrants feel this way. But if you’re some celebrity who was feuding with Donald Trump, and he said horrible things about you, you didn’t take it quite as seriously as you would with some other people. And frankly, I think some voters have felt that way. He did about as well with the Hispanic community as Mitt Romney had done, which is not great, but it’s millions and millions of Hispanics went out there and voted for Donald Trump after all the things that he said. There’s something about him that allows him to be nasty and for people to not react in the same way that they would react if a normal person was that nasty.

Isaac Chotiner: Before the campaign especially, there was a twinkle in his eye about some stuff. If you ever go back and listen to him on Howard Stern, there’s some sense that he has an understanding of himself as a character and could find humor in that. I find that to be less and less the case now. I don’t feel like he looks like he’s having fun. Occasionally, like with his tweet about the Oscars, saying I’m the only star.... It was funny and self-aware, exactly. And I find the self-awareness aspect of himself as a character to be less and less a part of him now.

Josh Barro: I think it’s two things. One is that the cruelty appeals to some people, and it fits in with the message of basically, “They’ve been taking advantage of you, and I’m not going to let them take advantage of you anymore.” He demonstrates strength through cruelty, which I think is ridiculous, but it appeals to some number of people. But then the other thing to remember is that Donald Trump is not popular. So I think most people do have the reaction to this that you have to it. So if you’re asking, “Am I taking crazy pills?,” it’s no. Most people agree with you...

tag:typepad.com,2003:post-6a00e551f08003883401b7c94fca1f970b2018-03-14T11:57:25-07:002018-03-14T11:59:11-07:00**Should-Read**: **A. J. Liebling**: [The Earl of Louisiana](http://amzn.to/2nU9r6P): "In the summer of 1959, A. J. Liebling, veteran writer for the New Yorker, came to Louisiana to cover a series of bizarre events... >...which began when Governor Earl K. Long was committed to a mental institution. Captivated by his subject, Liebling remained to write the fascinating yet tragic story of Uncle Earl's final year in politics. First published in 1961, The Earl of Louisiana recreates a stormy era of Louisiana politics and captures the style and personality of one of the most colorful and paradoxical figures in the state's history...J. Bradford DeLong

Should-Read: A. J. Liebling: The Earl of Louisiana: "In the summer of 1959, A. J. Liebling, veteran writer for the New Yorker, came to Louisiana to cover a series of bizarre events...

...which began when Governor Earl K. Long was committed to a mental institution. Captivated by his subject, Liebling remained to write the fascinating yet tragic story of Uncle Earl's final year in politics. First published in 1961, The Earl of Louisiana recreates a stormy era of Louisiana politics and captures the style and personality of one of the most colorful and paradoxical figures in the state's history...

tag:typepad.com,2003:post-6a00e551f08003883401b8d2df6b91970c2018-03-14T11:54:14-07:002018-03-14T11:56:36-07:00**Should-Read**: **Ernest Liu** (2016): [INDUSTRIAL POLICIES IN PRODUCTION NETWORKS](https://scholar.princeton.edu/sites/default/files/ernestliu/files/2017oct5.pdf): "Many developing countries adopt industrial policies that push resources towards selected economic sectors... >...How should countries choose which sectors to promote? I answer this question by characterizing optimal industrial policy in production networks embedded with market imperfections. My key finding is that effects of market imperfections accumulate through backward demand linkages, thereby generating aggregate sales distortions that are largest in the most upstream sectors. The distortion in sectoral sales is a sufficient statistic for the ratio between social and private marginal product of sectoral inputs; therefore, there is an incentive for a well-meaning government to subsidize upstream sectors. My sufficient statistic predicts the sectors targeted by government interventions in South Korea in the 1970s and in modern day China...J. Bradford DeLong

...How should countries choose which sectors to promote? I answer this question by characterizing optimal industrial policy in production networks embedded with market imperfections. My key finding is that effects of market imperfections accumulate through backward demand linkages, thereby generating aggregate sales distortions that are largest in the most upstream sectors. The distortion in sectoral sales is a sufficient statistic for the ratio between social and private marginal product of sectoral inputs; therefore, there is an incentive for a well-meaning government to subsidize upstream sectors. My sufficient statistic predicts the sectors targeted by government interventions in South Korea in the 1970s and in modern day China...

tag:typepad.com,2003:post-6a00e551f08003883401bb09fb75f3970d2018-03-14T11:53:09-07:002018-03-14T11:53:09-07:00**Should-Read**: **Dani Rodrik**: [Trump’s Trade Gimmickry](https://www.project-syndicate.org/commentary/trump-tariffs-trade-gimmickry-by-dani-rodrik-2018-03): "The imbalances and inequities generated by the global economy cannot be tackled by protecting a few politically well-connected industries, using manifestly ridiculous national security considerations as an excuse... >...Trump’s trade measures to date amount to small potatoes. In particular, they pale in comparison to the scale and scope of the protectionist policies of President Ronald Reagan’s administration in the 1980s. Reagan raised tariffs and tightened restrictions on a wide range of industries, including textiles, automobiles, motorcycles, steel, lumber, sugar, and electronics. He famously pressured Japan to accept “voluntary” restraints on car exports. He imposed 100% tariffs on selected Japanese electronics products when Japan allegedly failed to keep exported microchip prices high.... >Trump’s protectionism may well have very different consequences; history need not repeat itself. For one thing, even though their overall impact remains limited, Trump’s trade restrictions have more of a unilateral, in-your-face quality.... The voluntary export restraints (VERs) of the 1980s in autos and steel, for example, were administered by the exporting countries. This allowed Japanese and European companies to collude in raising their export prices for the US market.... Another contrast with the Reagan-era measures is that we are living in a...J. Bradford DeLong

Should-Read: Dani Rodrik: Trump’s Trade Gimmickry: "The imbalances and inequities generated by the global economy cannot be tackled by protecting a few politically well-connected industries, using manifestly ridiculous national security considerations as an excuse...

...Trump’s trade measures to date amount to small potatoes. In particular, they pale in comparison to the scale and scope of the protectionist policies of President Ronald Reagan’s administration in the 1980s. Reagan raised tariffs and tightened restrictions on a wide range of industries, including textiles, automobiles, motorcycles, steel, lumber, sugar, and electronics. He famously pressured Japan to accept “voluntary” restraints on car exports. He imposed 100% tariffs on selected Japanese electronics products when Japan allegedly failed to keep exported microchip prices high....

Trump’s protectionism may well have very different consequences; history need not repeat itself. For one thing, even though their overall impact remains limited, Trump’s trade restrictions have more of a unilateral, in-your-face quality.... The voluntary export restraints (VERs) of the 1980s in autos and steel, for example, were administered by the exporting countries. This allowed Japanese and European companies to collude in raising their export prices for the US market.... Another contrast with the Reagan-era measures is that we are living in a more advanced stage of globalization, and the problems that have accompanied it are greater....

A serious reform agenda would instead rein in the protection of drug companies and skilled professionals such as physicians... address concerns about social dumping and policy autonomy... target areas where the gains from trade are still very large, such as international worker mobility.... But it is in the domestic arena that the bulk of the work needs to be done. Repairing the domestic social contract requires a range of social, taxation, and innovation policies to lay the groundwork for a twenty-first-century version of the New Deal...

tag:typepad.com,2003:post-6a00e551f08003883401bb09fb75d3970d2018-03-14T11:50:43-07:002018-03-14T11:50:43-07:00**Should-Read**: **Bill McBride**: [Larry Kudlow is usually wrong...](http://www.calculatedriskblog.com/2018/03/larry-kudlow-is-usually-wrong.html) "...and frequently absurd, as an example, in June 2005 Kudlow wrote... >..."The Housing Bears are Wrong Again" (link has been replaced) and called me (or people like me) "bubbleheads": >>Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market. >I guess I was one of those "bubbleheads"! In December 2007, he wrote: Bush Boom Continues: >>There’s no recession coming. The pessimistas were wrong. It’s not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It’s finishing up its sixth consecutive year with more to come. Yes, it’s still the greatest story never told.... >In 2014, Kudlow claimed: "I've always believed the 1990s were Ronald Reagan's third term." In that piece, Kudlow was rewriting his...J. Bradford DeLong

..."The Housing Bears are Wrong Again" (link has been replaced) and called me (or people like me) "bubbleheads":

Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.

I guess I was one of those "bubbleheads"! In December 2007, he wrote: Bush Boom Continues:

There’s no recession coming. The pessimistas were wrong. It’s not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It’s finishing up its sixth consecutive year with more to come. Yes, it’s still the greatest story never told....

In 2014, Kudlow claimed: "I've always believed the 1990s were Ronald Reagan's third term." In that piece, Kudlow was rewriting his own history. Near the beginning of Clinton's first term, Kudlow was arguing Clinton's policies would take the economy into a deep recession or even depression. Kudlow was wrong then (I remember because I was on the other side of that debate), so he can't claim he "always believed" now. Nonsense...

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e27adf970c2018-03-14T11:40:25-07:002018-03-14T11:40:25-07:00**Should-Read**: **Noah Smith**: [California Affordable Housing Is No Mystery: Just Build More](https://www.bloomberg.com/view/articles/2018-03-14/california-affordable-housing-is-no-mystery-just-build-more): "Urban California should emulate Tokyo, which ensured the supply of dwellings stayed ahead of population growth. By Noah Smith... >...After years of dithering and hoping the problem would go away, California is finally taking steps to address its housing crisis.... Californians have only to gaze across the Pacific, to the city of Tokyo.... As of 2015, the average residential rent in Tokyo was about $2.53 a square foot at current exchange rates. That’s about half the level for San Francisco.... Why is Tokyo housing so affordable? It’s not because Japan’s population is shrinking. More people crowd into the capital city every year.... Tokyo rent is cheaper because it builds lots of housing... building more and building up.... >The national government revised regulations to allow more density. Combined with Japan’s famously simple zoning regulations, this resulted in a nation full of dense yet pleasant cities that offer decent, affordable living space. A key part of the equation, of course, is Japan’s efficient, convenient networks of public transportation.... >California... is on the right track. The idea of building dense housing around transit hubs—a very Japan-like development pattern—is an especially good...J. Bradford DeLong

...After years of dithering and hoping the problem would go away, California is finally taking steps to address its housing crisis.... Californians have only to gaze across the Pacific, to the city of Tokyo.... As of 2015, the average residential rent in Tokyo was about $2.53 a square foot at current exchange rates. That’s about half the level for San Francisco.... Why is Tokyo housing so affordable? It’s not because Japan’s population is shrinking. More people crowd into the capital city every year.... Tokyo rent is cheaper because it builds lots of housing... building more and building up....

The national government revised regulations to allow more density. Combined with Japan’s famously simple zoning regulations, this resulted in a nation full of dense yet pleasant cities that offer decent, affordable living space. A key part of the equation, of course, is Japan’s efficient, convenient networks of public transportation....

California... is on the right track. The idea of building dense housing around transit hubs—a very Japan-like development pattern—is an especially good one. Simplified zoning codes, curbs on repeated administrative challenges to housing projects and less severe height restrictions would also be great ideas. Government-subsidized housing—which Japan also provides for its low-income citizens—is an important part of the mix...

Larry Kudlow to NEC Chair...tag:typepad.com,2003:post-6a00e551f08003883401b7c95845b5970b2018-03-14T11:36:14-07:002018-03-14T11:36:14-07:00Larry Kudlow has not been an economist in at least a generation. Rather, he plays an economist on TV. Whatever ability he once had to make or analyze or present coherent and data-based economic arguments is long gone—with a number of his old friends blaming long-term consequences of severe and prolonged drug addiction. The right way to view this appointment is, I think, as if Donald Trump were to name William Shatner to command the Navy's 7th Fleet. That said, _probably_ little damage will be done. The major day-to-day job of the NEC Chair is to coordinate the presentation of economic policy options to the President, and to try to keep the agencies and departments on the same page as they implement policy. Kudlow has negative talents in either organizing and presenting alternative points of view or in controlling bureaucracies. Therefore the agencies will each continue marching to its different drummer, and there will be no coherent presentation of policy options to the President. But that will not be new.J. Bradford DeLong

Larry Kudlow has not been an economist in at least a generation. Rather, he plays an economist on TV. Whatever ability he once had to make or analyze or present coherent and data-based economic arguments is long gone—with a number of his old friends blaming long-term consequences of severe and prolonged drug addiction.

The right way to view this appointment is, I think, as if Donald Trump were to name William Shatner to command the Navy's 7th Fleet.

That said, probably little damage will be done. The major day-to-day job of the NEC Chair is to coordinate the presentation of economic policy options to the President, and to try to keep the agencies and departments on the same page as they implement policy. Kudlow has negative talents in either organizing and presenting alternative points of view or in controlling bureaucracies. Therefore the agencies will each continue marching to its different drummer, and there will be no coherent presentation of policy options to the President. But that will not be new.

tag:typepad.com,2003:post-6a00e551f08003883401b7c951a177970b2018-03-13T05:49:00-07:002018-02-26T14:38:49-08:00**Should-Read**: A finding that robots are becoming important. And I would question whether increased disability is cause or effect here. They say "cause": I am not sure why: **Katharine G. Abraham and Melissa S. Kearney**: [Explaining the Decline in the U.S. Employment-to-Population Ratio: A Review of the Evidence](http://www.nber.org/papers/w24333): "Within-age-group declines in employment among young and prime age adults have been at least as important... >...Labor demand factors, in particular trade and the penetration of robots into the labor market, are the most important drivers of observed within-group declines in employment. >Labor supply factors, most notably increased participation in disability insurance programs, have played a less important but not inconsequential role. Increases in the real value of the minimum wage and in the share of individuals with prison records also have contributed modestly to the decline in the aggregate employment rate. >In addition to these factors, whose effects we roughly quantify, we also identify a set of potentially important factors about which the evidence is too preliminary to draw any clear conclusion. These include improvements in leisure technology, changing social norms, increased drug use, growth in occupational licensing, and the costs and challenges associated with child care. Our evidence-driven ranking of...J. Bradford DeLong

...Labor demand factors, in particular trade and the penetration of robots into the labor market, are the most important drivers of observed within-group declines in employment.

Labor supply factors, most notably increased participation in disability insurance programs, have played a less important but not inconsequential role. Increases in the real value of the minimum wage and in the share of individuals with prison records also have contributed modestly to the decline in the aggregate employment rate.

In addition to these factors, whose effects we roughly quantify, we also identify a set of potentially important factors about which the evidence is too preliminary to draw any clear conclusion. These include improvements in leisure technology, changing social norms, increased drug use, growth in occupational licensing, and the costs and challenges associated with child care. Our evidence-driven ranking of factors should be useful for guiding future discussions about the sources of decline in the aggregate employment-to-population ratio and consequently the likely efficacy of alternative policy approaches to increasing employment rates...

Franklin Delano Roosevelt: First Inaugural Addresstag:typepad.com,2003:post-6a00e551f08003883401b8d2e218db970c2018-03-13T05:20:02-07:002018-03-16T17:34:57-07:00**Franklin Delano Roosevelt** (March 4, 1933): I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our Nation impels... >...This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper. >So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days. >In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds...J. Bradford DeLong

Franklin Delano Roosevelt (March 4, 1933): I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our Nation impels...

...This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper.

So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.

In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.

More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.

Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it. Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because rulers of the exchange of mankind's goods have failed through their own stubbornness and their own incompetence, have admitted their failure, and have abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.

Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live. Restoration calls, however, not for changes in ethics alone. This Nation asks for action, and action now.

Our greatest primary task is to put people to work. This is no unsolvable problem if we face it wisely and courageously. It can be accomplished in part by direct recruiting by the Government itself, treating the task as we would treat the emergency of a war, but at the same time, through this employment, accomplishing greatly needed projects to stimulate and reorganize the use of our natural resources.

Hand in hand with this we must frankly recognize the overbalance of population in our industrial centers and, by engaging on a national scale in a redistribution, endeavor to provide a better use of the land for those best fitted for the land. The task can be helped by definite efforts to raise the values of agricultural products and with this the power to purchase the output of our cities. It can be helped by preventing realistically the tragedy of the growing loss through foreclosure of our small homes and our farms. It can be helped by insistence that the Federal, State, and local governments act forthwith on the demand that their cost be drastically reduced. It can be helped by the unifying of relief activities which today are often scattered, uneconomical, and unequal. It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character. There are many ways in which it can be helped, but it can never be helped merely by talking about it. We must act and act quickly.

Finally, in our progress toward a resumption of work we require two safeguards against a return of the evils of the old order: there must be a strict supervision of all banking and credits and investments, so that there will be an end to speculation with other people's money; and there must be provision for an adequate but sound currency.

These are the lines of attack. I shall presently urge upon a new Congress, in special session, detailed measures for their fulfillment, and I shall seek the immediate assistance of the several States.

Through this program of action we address ourselves to putting our own national house in order and making income balance outgo. Our international trade relations, though vastly important, are in point of time and necessity secondary to the establishment of a sound national economy. I favor as a practical policy the putting of first things first. I shall spare no effort to restore world trade by international economic readjustment, but the emergency at home cannot wait on that accomplishment.

The basic thought that guides these specific means of national recovery is not narrowly nationalistic. It is the insistence, as a first considerations, upon the interdependence of the various elements in and parts of the United States—a recognition of the old and permanently important manifestation of the American spirit of the pioneer. It is the way to recovery. It is the immediate way. It is the strongest assurance that the recovery will endure.

In the field of world policy I would dedicate this Nation to the policy of the good neighbor—the neighbor who resolutely respects himself and, because he does so, respects the rights of others—the neighbor who respects his obligations and respects the sanctity of his agreements in and with a world of neighbors.

If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we cannot merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective. We are, I know, ready and willing to submit our lives and property to such discipline, because it makes possible a leadership which aims at a larger good. This I propose to offer, pledging that the larger purposes will bind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife.

With this pledge taken, I assume unhesitatingly the leadership of this great army of our people dedicated to a disciplined attack upon our common problems.

Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors. Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form. That is why our constitutional system has proved itself the most superbly enduring political mechanism the modern world has produced. It has met every stress of vast expansion of territory, of foreign wars, of bitter internal strife, of world relations.

It is to be hoped that the normal balance of Executive and legislative authority may be wholly adequate to meet the unprecedented task before us. But it may be that an unprecedented demand and need for undelayed action may call for temporary departure from that normal balance of public procedure.

I am prepared under my constitutional duty to recommend the measures that a stricken Nation in the midst of a stricken world may require. These measures, or such other measures as the Congress may build out of its experience and wisdom, I shall seek, within my constitutional authority, to bring to speedy adoption.

But in the event that the Congress shall fail to take one of these two courses, and in the event that the national emergency is still critical, I shall not evade the clear course of duty that will then confront me. I shall ask the Congress for the one remaining instrument to meet the crisis—broad Executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.

For the trust reposed in me I will return the courage and the devotion that befit the time. I can do no less.

We face the arduous days that lie before us in the warm courage of national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike. We aim at the assurance of a rounded and permanent national life.

We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.

In this dedication of a Nation we humbly ask the blessing of God. May He protect each and every one of us. May He guide me in the days to come.

tag:typepad.com,2003:post-6a00e551f08003883401bb09fb0ed4970d2018-03-13T04:37:33-07:002018-03-13T04:37:33-07:00**Should-Read**: **Chris Ladd**: [The article removed from Forbes, “Why White Evangelicalism Is So Cruel”](https://www.politicalorphans.com/the-article-removed-from-forbes-why-white-evangelicalism-is-so-cruel/): "Modern, white evangelicalism emerged from the interplay between race and religion in the slave states... >...Many Christian movements take the title “evangelical,” including many African-American denominations. However, evangelicalism today has been coopted as a preferred description for... an older, largely discredited title: Fundamentalist.... And among those evangelical churches, one denomination remains by far the leader in membership, theological pull, and political influence. There is still today a Southern Baptist Church. More than a century and a half after the Civil War, and decades after the Methodists and Presbyterians reunited with their Yankee neighbors, America’s most powerful evangelical denomination remains defined, right down to the name over the door, by an 1845 split over slavery...J. Bradford DeLong

...Many Christian movements take the title “evangelical,” including many African-American denominations. However, evangelicalism today has been coopted as a preferred description for... an older, largely discredited title: Fundamentalist.... And among those evangelical churches, one denomination remains by far the leader in membership, theological pull, and political influence. There is still today a Southern Baptist Church. More than a century and a half after the Civil War, and decades after the Methodists and Presbyterians reunited with their Yankee neighbors, America’s most powerful evangelical denomination remains defined, right down to the name over the door, by an 1845 split over slavery...

tag:typepad.com,2003:post-6a00e551f08003883401b8d2e136c3970c2018-03-12T14:44:20-07:002018-03-12T14:44:20-07:00**Should-Read**: So is it now time to shift to the prime-age employment rate as our principal thumbnail shorthand gauge for the state of the labor market?: **Nick Bunker**: [Just how tight is the U.S. labor market?](http://cdn.equitablegrowth.org/wp-content/uploads/2017/10/11124521/101217-lab-wag-ib.pdf): "Spoiler: There’s room for the job market to improve... >...If the current unemployment rate is indicative of a very tight labor market, then why does wage growth continue to be so tepid? If the supply of potentially employable workers is tapped out, then the price of labor—wages—should grow at an increasingly faster pace. Yet as the unemployment rate declined and hit levels many associate with “full employment,” wage growth has yet to break out of the range of 2 percent to 2.5 percent per year. One simple explanation of this anomaly of a tight labor market with weak wage growth is that the labor market is not actually that tight. Indeed, the unemployment rate currently does not do a good job of predicting wage growth. What the data show is that a given unemployment rate can be associated with a wide range of wage-growth levels.... >The unemployment rate is still a useful measure of the health of the labor market. But it should be...J. Bradford DeLong

Should-Read: So is it now time to shift to the prime-age employment rate as our principal thumbnail shorthand gauge for the state of the labor market?: Nick Bunker: Just how tight is the U.S. labor market?: "Spoiler: There’s room for the job market to improve...

...If the current unemployment rate is indicative of a very tight labor market, then why does wage growth continue to be so tepid? If the supply of potentially employable workers is tapped out, then the price of labor—wages—should grow at an increasingly faster pace. Yet as the unemployment rate declined and hit levels many associate with “full employment,” wage growth has yet to break out of the range of 2 percent to 2.5 percent per year. One simple explanation of this anomaly of a tight labor market with weak wage growth is that the labor market is not actually that tight. Indeed, the unemployment rate currently does not do a good job of predicting wage growth. What the data show is that a given unemployment rate can be associated with a wide range of wage-growth levels....

The unemployment rate is still a useful measure of the health of the labor market. But it should be taken in the context of other measures. Even if two labor markets have the same unemployment rate, one will be tighter than the other if their employment rates vary significantly. When assessing the health of the labor market, policymakers have to look at both unemployment and employment. If the U.S. labor market still has room to run, then policymakers should look favorably at monetary and fiscal policies that would increase aggregate demand. This information is particularly important for policymakers at the Federal Reserve as they consider the pace at which they raise interest rates...

Trump’s Tax on America: Fresh at Project Syndicatetag:typepad.com,2003:post-6a00e551f08003883401b8d2e1f328970c2018-03-12T14:21:42-07:002018-03-12T14:21:42-07:00**Project Syndicate**: [Trump’s Tax on America](https://www.project-syndicate.org/commentary/trump-tariffs-on-steel-aluminum-by-j--bradford-delong-2018-03): "After a year of serving as a useful idiot for congressional Republicans and their wealthy donors to push through tax cuts and deregulation, US President Donald Trump is now following through on his protectionist promises. Sooner or later, Republicans might realize that inept kleptocracy is not the best form of government after all. Mitch McConnell, the US Senate’s Republican Majority Leader, recently proclaimed that “2017 was the best year for conservatives in the 30 years that I’ve been here,” not least because President Donald Trump’s administration “has turned out to be … very solid, conservative, right of center, pro-business.” One would undoubtedly hear Republican donors express similar sentiments over their shrimp hors d’oeuvres. After all, the Trump administration has rolled back environmental regulations and cut taxes for the rich. What’s not to like?... [Read MOAR at Project Syndicate](https://www.project-syndicate.org/commentary/trump-tariffs-on-steel-aluminum-by-j--bradford-delong-2018-03)J. Bradford DeLong

Project Syndicate: Trump’s Tax on America: "After a year of serving as a useful idiot for congressional Republicans and their wealthy donors to push through tax cuts and deregulation, US President Donald Trump is now following through on his protectionist promises. Sooner or later, Republicans might realize that inept kleptocracy is not the best form of government after all.

Mitch McConnell, the US Senate’s Republican Majority Leader, recently proclaimed that “2017 was the best year for conservatives in the 30 years that I’ve been here,” not least because President Donald Trump’s administration “has turned out to be … very solid, conservative, right of center, pro-business.” One would undoubtedly hear Republican donors express similar sentiments over their shrimp hors d’oeuvres. After all, the Trump administration has rolled back environmental regulations and cut taxes for the rich. What’s not to like?... Read MOAR at Project Syndicate

Econ 113: Spring 2018: Problem Set 2: Who Benefitted from Slavery? DRAFTtag:typepad.com,2003:post-6a00e551f08003883401b8d2dff622970c2018-03-12T13:20:56-07:002018-03-12T05:55:51-07:001. Read this webpage: 2. Chase the link to the handout and read it: 3. Print out and to the problem set at: ---- Who profited from North American slavery before the Civil War? Ask a historian, or a political scientist, or a politician the question, “Who benefited from North American slavery?” and the answer you will probably get is, “The slaveholders, of course. The slaveholders got to work their slaves hard, pay them little, sell what they made for healthy prices, and get rich." We economists have a different view... We economists think seriously about the real long-run "incidence" of events and processes. We economists think historians, political scientists, historians, and all others should take microeconomics to learn about incidence--and then take it again. What's our take on the beneficiaries of North American slavery before the Civil War? Three groups gained the most: 1. Those slaveholders who owned slaves when it became clear that Cotton would be King--that the British industrial revolution was producing an extraordinary demand for this stuff and that Eli Whitney’s cotton gin meant that it could be produced cheaply--profited immensely as the prices of the slaves they owned rose. 2. Consumers of machine-made cotton textiles,...J. Bradford DeLong

Ask a historian, or a political scientist, or a politician the question, “Who benefited from North American slavery?” and the answer you will probably get is, “The slaveholders, of course. The slaveholders got to work their slaves hard, pay them little, sell what they made for healthy prices, and get rich."

We economists have a different view...

We economists think seriously about the real long-run "incidence" of events and processes. We economists think historians, political scientists, historians, and all others should take microeconomics to learn about incidence--and then take it again.

What's our take on the beneficiaries of North American slavery before the Civil War? Three groups gained the most:

Those slaveholders who owned slaves when it became clear that Cotton would be King--that the British industrial revolution was producing an extraordinary demand for this stuff and that Eli Whitney’s cotton gin meant that it could be produced cheaply--profited immensely as the prices of the slaves they owned rose.

Consumers of machine-made cotton textiles, from peasants in Belgium able for the first time to buy a rug to London carters to Midwestern pioneers who found basic clothing the only cheap part of equipping a covered wagon, probably profited the most in aggregate.

Northern and western Americans whose taxes were lower because of the tariffs collected on imports of goods financed by cotton exports profited as well.

Harold Macmillan: "Greeks to Their Romans...": Document: On the Twentieth Century Imperial Successiontag:typepad.com,2003:post-6a00e551f08003883401bb09fadcff970d2018-03-12T10:57:45-07:002018-03-12T10:59:17-07:00**D.R. Thorpe**: [Supermac: The Life of Harold Macmillan](https://play.google.com/store/books/details?id=lzVgMHMwZtwC) >[Harold] Macmillan dubbed Roosevelt ‘The Emperor of the West’, and Churchill ‘The Emperor of the East’. When Eisenhower paid court to Roosevelt, Macmillan said to Bob Murphy, ‘Isn’t he just like a Roman centurion?’ The classical analogy famously went further. To Dick Crossman, Director of Psychological Warfare at AFHQ, he said: >>We, my dear Crossman, are Greeks in this American empire. You will find the Americans much as the Greeks found the Romans – great big vulgar, bustling people, more vigorous than we are and also more idle, with more unspoiled virtues, but also more corrupt. We must run A.F.H.Q. as the Greeks ran the operations of the Emperor Claudius... The source Thorpe gives for this quote is the _Sunday Telegraph_ for February 9, 1964. Anybody found a longer description? Not in the biographies, and library does not seem to have Crossman's _Backbench Diaries_... ---- ---- **Thorpe**: >On 22 December, Macmillan was summoned to Downing Street. It was one of the turning points of his life. Churchill outlined the complex situation obtaining in North Africa. Macmillan’s importance, he emphasised, would lie in the relationship he could build up with Eisenhower… >As Macmillan...J. Bradford DeLong
<div xmlns="http://www.w3.org/1999/xhtml"><p><img style="display:block; margin-left:auto; margin-right:auto;" src="http://delong.typepad.com/.a/6a00e551f08003883401bb09fadcd4970d-pi" alt="File Allied leaders in the Sicilian campaign jpg Wikipedia" title="File_Allied_leaders_in_the_Sicilian_campaign_jpg_-_Wikipedia.png" border="0" width="750" height="251" /></p>
<p><strong>D.R. Thorpe</strong>: <a href="https://play.google.com/store/books/details?id=lzVgMHMwZtwC">Supermac: The Life of Harold Macmillan</a></p>
<blockquote>
<p>[Harold] Macmillan dubbed Roosevelt ‘The Emperor of the West’, and Churchill ‘The Emperor of the East’. When Eisenhower paid court to Roosevelt, Macmillan said to Bob Murphy, ‘Isn’t he just like a Roman centurion?’ The classical analogy famously went further. To Dick Crossman, Director of Psychological Warfare at AFHQ, he said:</p>
<blockquote>
<p>We, my dear Crossman, are Greeks in this American empire. You will find the Americans much as the Greeks found the Romans – great big vulgar, bustling people, more vigorous than we are and also more idle, with more unspoiled virtues, but also more corrupt. We must run A.F.H.Q. as the Greeks ran the operations of the Emperor Claudius...</p>
</blockquote>
</blockquote>
<p>The source Thorpe gives for this quote is the <em>Sunday Telegraph</em> for February 9, 1964. Anybody found a longer description? Not in the biographies, and library does not seem to have Crossman's <em>Backbench Diaries</em>...</p>
<hr />
<p><a href="https://www.icloud.com/keynote/0IhgSjKDwAyUE6DLH-1VzyklA">https://www.icloud.com/keynote/0IhgSjKDwAyUE6DLH-1VzyklA</a></p>
<hr />
<p><strong>Thorpe</strong>:</p>
<blockquote>
<p>On 22 December, Macmillan was summoned to Downing Street. It was one of the turning points of his life. Churchill outlined the complex situation obtaining in North Africa. Macmillan’s importance, he emphasised, would lie in the relationship he could build up with Eisenhower…</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p>As Macmillan prepared to travel to North Africa, Churchill telegraphed Roosevelt. ‘He will be, I am sure, a help. He is animated by the friendliest feelings towards the United States, and his mother hails from Kentucky’…</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p>For Macmillan who, 12 months earlier, had been occupying a minor post in the Colonial Office, sending out memoranda about the Yeast Company of Jamaica, the opportunities in North Africa were an extraordinary transformation. He may not have been an Octavius Caesar, but he could lay fair claim to being a Maecenas or an Agrippa…</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p>Macmillan’s… task was fourfold…</p>
<ol>
<li>Oil the wheels of the Anglo-American relationship at Allied headquarters…</li>
<li>Serve as an informal head to the British civilian officials in Algiers…</li>
<li>Act as the representative of His Majesty’s Government, dealing with the French. In this, his most important function was to persuade American colleagues, both civilian and military, to accept British thinking and policy regarding the French, and the eventual elevation of de Gaulle into the position of a de facto prime minister…</li>
<li>Deal with Italian questions… as the Allied forces invaded Sicily and then pushed northwards through the Italian mainland.</li>
</ol>
<p>Persuade the Commander-in-Chief, General Eisenhower, of the wisdom of the policy of His Majesty’s Government in the course of fulfilling those responsibilities…</p>
</blockquote>
<p>&nbsp;</p>
<blockquote>
<p>Macmillan met Eisenhower… on…2 January.… ‘Considering that neither Washington or London had informed him of my appointment (which one of his staff heard by chance on the radio),’ Macmillan wrote home to Dorothy, ‘the interview was quite a success.’</p>
<p>It did not seem so at the outset. Eisenhower bluntly asked Macmillan who he was, and what he was going to do. Macmillan explained that he was to liaise between AFHQ and Churchill, but at present was not <em>au fait</em> with all the political problems. Eisenhower told him that he would have plenty to learn. In any case, Eisenhower said, Hal Mack was a wholly satisfactory liaison officer. </p>
<p>Seeking some kind of common ground, as the interview began to wind down dishearteningly, Macmillan asked Eisenhower if he knew his mother’s home state. Eisenhower, thinking Macmillan meant an English county, did not see how he could possibly be expected to know it. Macmillan then explained that his mother had been born in the town of Spencer in Indiana.</p>
<p>From that moment the tone of the meeting changed. Even though Eisenhower did not treat Macmillan as an equal, even as a British minister of Cabinet rank, he thereafter regarded him as a kinsman…</p>
</blockquote>
<hr />
<h3>The Grand Strategy of the British Empire for Superpower Succession</h3>
<p>From 1830 to 1900, Britain could out-manufacture any likely coalition of its European enemies. By 1913, that was no longer true—Britain was just one of many projecting power across the globe. Would the 20th Century be a British, a German, or a Russian century? The British Empire preferred that it be a British century, but it was not all-powerful.</p>
<p>In 1800, the U.S. was a developing country—the near-plaything of the superpowers Britain and France. By 1870, the U.S. was a “power”—with an army, a navy, and an industrial base to support them—but unable to project that power south of Mexico City or east of the Bahamas.</p>
<p>Nevertheless, there was a shift of Britain’s strategy toward the U.S. starting in the 1840s:</p>
<ul>
<li>Unusually: making a deal with the U.S. over the Oregon Territory—a deal that gives the U.S. what is now Washington state and part of Idaho, which were British settled. (The usual British negotiating strategy would have been to send the gunboats to burn the U.S.'s capital, and then dictate terms.)</li>
<li>Cultural and economic contact: Rhodes Scholarships, dukes marrying the daughters of plutocrats, massive investment in U.S. industrial development.</li>
<li>One often-expressed hope was to find a way to bind together the English-speaking countries:
<ul>
<li>Maybe the U.S. would outsource foreign policy to the Mother Country?</li>
<li>At least a “special relationship”</li>
</ul></li>
</ul>
<p>This was very important. By 1913, the U.S. was a <em>potential</em> superpower. By 1939, the U.S. was <em>the</em> superpower:</p>
<p>&nbsp;</p>
<p><strong>Population: U.S. vs. British Empire (“European”)</strong>:</p>
<p>1800: 4 vs. 17 <br />
1840: 13 vs. 28 <br />
1870: 33 vs. 37 <br />
1913: 83 vs. 59—largely due to the great wave of immigration</p>
<p>&nbsp;</p>
<p><strong>Manufacturing: U.S. as a percentage of British Plus Dominions</strong>:</p>
<p>1860: 30% <br />
1880: 60% <br />
1900: 100% <br />
1913: 175% <br />
1929: 300%</p>
</div>
tag:typepad.com,2003:post-6a00e551f08003883401b8d2e1cd21970c2018-03-12T05:42:38-07:002018-03-12T14:23:10-07:00**Should-Read**: **Michael Kremer** (1993): [The O-Ring Theory of Economic Development](https://pdfs.semanticscholar.org/61e4/b9935c01f5620f7fa5fd20fe6c248152095f.pdf): "This paper proposes a production function describing processes subject to mistakes in any of several tasks... >...It shows that high-skill workers-those who make few mistakes-will be matched together in equilibrium, and that wages and output will rise steeply in skill. The model is consistent with large income differences between countries, the predominance of small firms in poor countries, and the positive correlation between the wages of workers in different occupations within enterprises. Imperfect observability of skill leads to imperfect matching and thus to spillovers, strategic complementarity, and multiple equilibria in education.... >Quantity cannot be substituted for quality... workers of similar skill will be matched together... schedule of wages as a function of worker skill. Under this production function, small differences in worker skill lead to large differences in wages and output, so wage and productivity differentials between countries with different skill levels are enormous.... Firms will offer jobs to only some workers rather than paying all workers their estimated marginal product. If tasks are performed sequentially, high-skill workers will be allocated to later stages of production.... If firms can choose among technologies with different numbers of tasks, the highest skill...J. Bradford DeLong

...It shows that high-skill workers-those who make few mistakes-will be matched together in equilibrium, and that wages and output will rise steeply in skill. The model is consistent with large income differences between countries, the predominance of small firms in poor countries, and the positive correlation between the wages of workers in different occupations within enterprises. Imperfect observability of skill leads to imperfect matching and thus to spillovers, strategic complementarity, and multiple equilibria in education....

Quantity cannot be substituted for quality... workers of similar skill will be matched together... schedule of wages as a function of worker skill. Under this production function, small differences in worker skill lead to large differences in wages and output, so wage and productivity differentials between countries with different skill levels are enormous.... Firms will offer jobs to only some workers rather than paying all workers their estimated marginal product. If tasks are performed sequentially, high-skill workers will be allocated to later stages of production.... If firms can choose among technologies with different numbers of tasks, the highest skill workers will use the highest n technology.... These predictions of the model match stylized facts about the world, and although each of these facts may be due to a variety of causes, together they suggest that O-ring production functions are empirically relevant.

Imperfect matching of workers due to imperfect information about worker skill leads to positive spillovers and strategic complementarity in investment in human capital. Thus, subsidies to investment in human capital may be Pareto optimal. Small differences between countries in such subsidies or in exogenous factors such as geography or the quality of the educational system lead to multiplier effects that create large differences in worker skill. If strategic complementarity is sufficiently strong, microeconomically identical nations or groups within nations could settle into equilibria with different levels of human capital.

tag:typepad.com,2003:post-6a00e551f08003883401b8d2df73e1970c2018-03-12T05:06:27-07:002018-03-12T05:06:27-07:00**Should-Read**: Lots to think about about how statistics and economics should be being taught these days: **Drew Conway** (2013): [The Data Science Venn Diagram](http://drewconway.com/zia/2013/3/26/the-data-science-venn-diagram): "The primary colors of data: hacking skills, math and stats knowledge, and substantive expertise... >...On Monday we spent a lot of time talking about "where" a course on data science might exist at a university. The conversation was largely rhetorical, as everyone was well aware of the inherent interdisciplinary nature of the these skills; but then, why have I highlighted these three? First, none is discipline specific, but more importantly, each of these skills are on their own very valuable, but when combined with only one other are at best simply not data science, or at worst downright dangerous. >For better or worse, data is a commodity traded electronically; therefore, in order to be in this market you need to speak hacker.... Being able to manipulate text files at the command-line, understanding vectorized operations, thinking algorithmically; these are the hacking skills that make for a successful data hacker. Once you have acquired and cleaned the data, the next step is to actually extract insight from it. In order to do this, you need to apply appropriate...J. Bradford DeLong

Should-Read: Lots to think about about how statistics and economics should be being taught these days: Drew Conway (2013): The Data Science Venn Diagram: "The primary colors of data: hacking skills, math and stats knowledge, and substantive expertise...

...On Monday we spent a lot of time talking about "where" a course on data science might exist at a university. The conversation was largely rhetorical, as everyone was well aware of the inherent interdisciplinary nature of the these skills; but then, why have I highlighted these three? First, none is discipline specific, but more importantly, each of these skills are on their own very valuable, but when combined with only one other are at best simply not data science, or at worst downright dangerous.

For better or worse, data is a commodity traded electronically; therefore, in order to be in this market you need to speak hacker.... Being able to manipulate text files at the command-line, understanding vectorized operations, thinking algorithmically; these are the hacking skills that make for a successful data hacker. Once you have acquired and cleaned the data, the next step is to actually extract insight from it. In order to do this, you need to apply appropriate math and statistics methods, which requires at least a baseline familiarity with these tools. This is not to say that a PhD in statistics in required to be a competent data scientist, but it does require knowing what an ordinary least squares regression is and how to interpret it.

In the third critical piece—substance—is where my thoughts on data science diverge from most of what has already been written on the topic. To me, data plus math and statistics only gets you machine learning.... [But] science is about discovery and building knowledge, which requires some motivating questions about the world and hypotheses that can be brought to data and tested with statistical methods....

Finally, a word on the hacking skills plus substantive expertise danger zone. This is where I place people who, "know enough to be dangerous," and is the most problematic area of the diagram. In this area people who are perfectly capable of extracting and structuring data, likely related to a field they know quite a bit about, and probably even know enough R to run a linear regression and report the coefficients; but they lack any understanding of what those coefficients mean. It is from this part of the diagram that the phrase "lies, damned lies, and statistics" emanates, because either through ignorance or malice this overlap of skills gives people the ability to create what appears to be a legitimate analysis without any understanding of how they got there or what they have created. Fortunately, it requires near willful ignorance to acquire hacking skills and substantive expertise without also learning some math and statistics along the way. As such, the danger zone is sparsely populated, however, it does not take many to produce a lot of damage.

tag:typepad.com,2003:post-6a00e551f08003883401b8d2de3022970c2018-03-12T04:58:31-07:002018-03-12T05:00:42-07:00**Should-Read**: **Anatole Kaletsky **: [The Market Dogs That Didn’t Bark](https://www.project-syndicate.org/commentary/price-correction-limited-to-equities-by-anatole-kaletsky-2018-02): "The bond market’s complacency about US interest rates and inflation may be surprising... [may] turn out to be an expensive mistake... but it is a fact... >...The 30-year US bond yield is still only 3.2% – exactly where it was a year ago and in most of 2015 and 2016. It is almost a full percentage point lower than in 2013 and two full points below the level in 2007.... The bond market believes that the long-term outlook for growth and inflation is more or less the same as it was in the period from 2015 until early last year – and much weaker than it was a decade ago.... For the moment, however, the behavior of long-term US interest rates implies an almost unshakeable confidence among investors that inflation will never again become a serious threat, despite President Donald Trump’s decision to slash taxes, boost government spending, and abandon deficit limits in a US economy already nearing full employment. >This points our investigation toward the third dog that didn’t bark. Currencies were almost completely unmoved by the stock-market commotion. This quiescence makes sense: If investors are unperturbed by inflationary...J. Bradford DeLong

Should-Read: *Anatole Kaletsky *: The Market Dogs That Didn’t Bark: "The bond market’s complacency about US interest rates and inflation may be surprising... [may] turn out to be an expensive mistake... but it is a fact...

...The 30-year US bond yield is still only 3.2% – exactly where it was a year ago and in most of 2015 and 2016. It is almost a full percentage point lower than in 2013 and two full points below the level in 2007.... The bond market believes that the long-term outlook for growth and inflation is more or less the same as it was in the period from 2015 until early last year – and much weaker than it was a decade ago.... For the moment, however, the behavior of long-term US interest rates implies an almost unshakeable confidence among investors that inflation will never again become a serious threat, despite President Donald Trump’s decision to slash taxes, boost government spending, and abandon deficit limits in a US economy already nearing full employment.

This points our investigation toward the third dog that didn’t bark. Currencies were almost completely unmoved by the stock-market commotion. This quiescence makes sense: If investors are unperturbed by inflationary pressures in the US economy, they can surely be much more confident about the rest of the world. In Europe, Japan, and many emerging markets, cyclical upswings are more recent, inflation is lower, and economic management is sounder than in the US. The implication is obvious: The global expansion and bull market will continue, but leadership will move from America to the more promising economies of Europe, Japan, and the emerging world.

tag:typepad.com,2003:post-6a00e551f08003883401b7c95351bc970b2018-03-12T04:52:08-07:002018-03-12T04:54:17-07:00**Should-Read**: **Evan A. Feigenbaum**: [A Chinese Puzzle: Why Economic "Reform" in Xi's China Has More Meanings than Market Liberalization](https://macropolo.org/chinese-puzzle-economic-reform-xis-china-meanings-market-liberalization/): "What is going on that produces such a gaping disconnect between Beijing’s story about reform and the views of so many in the markets?... >...Or to put that point as bluntly as possible: are Chinese politicians and bureaucrats, as some international observers would have it, uniquely dissembling? I’d like to argue that a major part of this disconnect stems from a yawning gap in the definition of what actually constitutes “reform” in the Chinese political context of today. To put it as directly as I can, “reform” simply does not have the same meaning in China today that it does to many of us, and especially to a lot of market observers. Unsurprisingly, we tend to focus on market liberalization, to the exclusion of most else. But economic “reform” in Xi Jinping’s China has at least two additional meanings—and these can actually contradict and undermine market goals. >To Beijing, “reform” means: >* market liberalization; >* administrative measures to increase bureaucratic and operational efficiencies; and >* a rebalancing of authorities and decision powers among central and local levels of government. >Viewed in...J. Bradford DeLong

...Or to put that point as bluntly as possible: are Chinese politicians and bureaucrats, as some international observers would have it, uniquely dissembling? I’d like to argue that a major part of this disconnect stems from a yawning gap in the definition of what actually constitutes “reform” in the Chinese political context of today. To put it as directly as I can, “reform” simply does not have the same meaning in China today that it does to many of us, and especially to a lot of market observers. Unsurprisingly, we tend to focus on market liberalization, to the exclusion of most else. But economic “reform” in Xi Jinping’s China has at least two additional meanings—and these can actually contradict and undermine market goals.

To Beijing, “reform” means:

market liberalization;

administrative measures to increase bureaucratic and operational efficiencies; and

a rebalancing of authorities and decision powers among central and local levels of government.

Viewed in those broadened terms, there is actually quite a lot of “reform” happening in China today. But so much of that reform simply does not implicate the market. And even more important, these three distinct Xi-era “reform” goals can flatly contradict each other. That, in turn, leaves Beijing often trading off one kind of reform in pursuit of another. And more often than not, it is market liberalization that slips to a (distant) third priority between administrative reform and changes to Chinese-style “federalism.”... Xi Jinping has put a very clear premium on political aims, not economic goals.... Whatever [economic] rebalancing has taken place has mostly happened organically rather than by policy intervention or design. And this means that the Chinese president’s top three priorities—a cleaner CCP, a more disciplined CCP, and a stronger and more enduring CCP—have yielded a deeper connection between political goals and economic policy outcomes than China has witnessed in a generation. Inevitably, this leads to an overemphasis on the administrative aspects of reform....

Here are the three big things I take away from the fact that debates about “reform” in China are now much broader than the one we are having outside its borders: One takeaway is that reform is, quite simply, about Beijing’s priorities, not ours.... Second, Beijing is not nearly as attuned to foreign firms as it used to be. That means the reforms American and European multinationals want are just not going to happen without a lot of backstopping from their home governments.... Third, reform in China will, for at least the next five years, be viewed almost exclusively through a domestic lens.

When Xi Jinping and his colleagues toss and turn at night, I suspect their major policy nightmares and preoccupations are entirely homegrown: (1) how to stay in power and overcome dissent; (2) how to create some 12 million new jobs each year; (3) how to maintain sufficient growth to support those employment goals; (4) how to manage the demographic challenges of an aging country through welfare and “entitlement” reforms; and (5) how to mitigate pollution and environmental challenges. These five priority agendas implicate reform in all three of the senses I outlined above. But they do not all implicate market liberalization equally, and some of them not very much at all.... Xi Jinping is going be leading the country for a very long time to come. Like it or not, this is what I suspect “reform” is going to mean in China for a long time to come as well.